Levy v. McGill

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED DECEMBER 8, 2004
November 11, 2004
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 03-60278
DARLEEN JACOBS LEVY,
Plaintiff-Counter-Defendant-Appellee,
versus
CARL MCGILL AND MCGILL WELLWORKS, INC.,
Defendants-Counter-Claimants-Appellants.
--------------------
Appeal from the United States District Court
for the Southern District of Mississippi
(01-CV-68)
--------------------
Before WIENER and PRADO, Circuit Judges, and KINKEADE,* District
Judge.
PER CURIAM:**
Defendants-appellants Carl McGill and McGill Wellworks, Inc.
(collectively, “the McGills”) appeal the district court’s denial of
their motion for summary judgment as to whether Hibernia National
Bank (“Hibernia”) acquired title to a note and deed of trust
encumbering real property in Mississippi by virtue of an assignment
from the Federal Deposit Insurance Corporation (“FDIC”) and then
*
District Judge for the Northern District of Texas, sitting
by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
under the limited circumstances set forth in 5TH CIR. R. 47.5.4.
conducted a valid foreclosure sale to pass title to plaintiff-
appellee Darleen Jacobs Levy (“Levy”). The McGills also appeal the
district court’s order, following a bench trial, that quieted
Levy’s title to the property based on a determination that they had
failed to establish continuous adverse possession of 62 lots for
ten years. We affirm the district court on both counts.
I. FACTS AND PROCEEDINGS
Over a period of years, Carl McGill and his former wife, Mary
McGill, acquired title to 82 lots in the Dolan’s Race Track
Addition subdivision in Gulfport, Mississippi. In June 1987, Carl
and Mary encumbered the property to secure a loan from the First
National Bank of Slidell, Louisiana (“First National”), executing
a Deed of Trust to E.C. Stuart, Jr., Trustee.
First National subsequently went into receivership, and the
FDIC succeeded to its interest in Carl and Mary’s note and Deed of
Trust by operation of law.3 After obtaining authority from the
United States District Court for the Eastern District of Louisiana,
the FDIC sold First National’s assets, including Carl and Mary’s
note and Deed of Trust, to Hibernia under an Asset Purchase
Agreement (“APA”). In August 1989, Hibernia executed a Notice of
Substitution of Trustee for the Deed of Trust and appointed Robert
L. Genin, Jr. as substitute trustee.
3
See 12 U.S.C. § 1821(d)(2)(A)(i).
2
In October 1989, Carl and Mary transferred their interest in
the lots to McGill Wellworks, Inc., a Mississippi corporation.
Carl and Mary McGill subsequently defaulted on the loan secured by
the property.4 After publication and posting of a substituted
trustee’s notice of sale, Genin held a foreclosure sale on May 1,
1990 and conveyed the property to Hibernia.
After the foreclosure sale, the McGills continued to use the
property and the improvements on it as they had done before the
foreclosure sale. During 1990 and 1991, Carl McGill, his sister-
in-law, Tammy McGill, or both, had several encounters with
representatives of Hibernia during which they were ejected by the
McGills from what they believed to be their rightful property. In
May 1992, Hibernia sold the property at auction to Levy for $8,800.
In July 2000, Levy filed a Complaint for Damages and to Quiet
Title against the McGills in the United States District Court for
the Eastern District of Louisiana. Levy sought to confirm and
quiet her title to the 82 lots that she had acquired from Hibernia.
Levy also sought to recover revenue that the McGills had collected
on the property over the years.
The United States District Court for the Eastern District of
Louisiana transferred the case to the United States District Court
for the Southern District of Mississippi.5 The McGills filed a
4
In 1989, Mary separated from Carl and later divorced him.
5
Hereafter, all references to the “district court” are to the
United States District Court for the Southern District of
3
counterclaim in the district court setting forth five counts: (1)
confirmation of title by adverse possession; (2) removal of title
clouds created by Levy’s complaint; (3) confirmation of title and
removal of clouds as to lots that Levy did not claim; (4)
confirmation of title to a prescriptive easement; and (5)
declaratory judgment that Levy did not have title to the property
because her predecessor-in-title, Hibernia, acquired its title by
a defective Substituted Trustee’s Deed.6
In October 2001, the district court entered an Agreed Order
that dismissed with prejudice “all claims for monetary damages”
between the McGills and Levy. The Agreed Order also dismissed
without prejudice all claims “relating to surveys, boundary lines
and physical location of the subject real property . . . .”
Both parties then moved for summary judgment on two issues:
(1) whether Hibernia’s foreclosure on the McGills’ Deed of Trust
was valid; and (2) whether the McGills adversely possessed 62 of
the 82 lots for a continuous period of ten years. In January 2002,
the district court found that no genuine issue of material fact
existed as to the validity of the foreclosure sale and granted
summary judgment in favor of Levy on this issue. As the McGills
claimed title to only 62 of the 82 lots, the district court’s grant
Mississippi.
6
As the McGills do not argue counts three and four on appeal,
they are abandoned. See Meadowbriar Home for Children, Inc. v.
Gunn, 81 F.3d 521, 533 (5th Cir. 1996) (citing Randall v. Chevron
U.S.A., Inc., 13 F.3d 888, 911 (5th Cir. 1994)).
4
of summary judgment in favor of Levy quieted her title as to the 20
uncontested lots. The district court also ruled that genuine
issues of material fact existed with regard to the adverse
possession issue and thus denied both parties’ motions on that
claim.
After a bench trial on the issue of adverse possession only,
the court entered a final judgment that cleared Levy’s title to the
remaining 62 lots. The district court determined that Levy’s suit
had not tolled the McGills’ alleged period of adverse possession
until February 2001, when the District Court for the Eastern
District of Louisiana transferred it to the Southern District of
Mississippi.7 As such, the McGills needed to establish
commencement of any alleged period of adverse possession by March
1991, ten years before the transfer to the Mississippi district
court. The district court ruled that the McGills had failed to
prove commencement of a period of adverse possession by March 1991
by making a positive assertion of a right hostile to the record
title owner. In the alternative, the district court concluded that
the McGills had interrupted any period of adverse possession that
7
The filing of a suit to contest the adverse possessor’s
possession interrupts the ten-year period. See Trotter v. Roper,
92 So. 2d 230, 232 (Miss. 1957). The question whether the district
court correctly determined that Levy’s suit did not toll the ten-
year period until its transfer to the Mississippi district court is
not before us for review; neither would the answer to that question
affect the outcome of this action.
5
might have been established when they acknowledged Hibernia’s and
Levy’s title to the foreclosed lots. This appeal ensued.
II. ANALYSIS
A. Summary Judgment
1. Standard of Review
We review a district court’s grant or denial of summary
judgment de novo and use the same standard as that applied by the
district court.8 Summary judgment is “proper, if, viewing the
evidence and inferences drawn from that evidence in the light most
favorable to the non-moving party, there is no genuine issue of
material fact and the moving part is entitled to judgment as a
matter of law.”9 At this stage, “a court may not weigh the
evidence or evaluate the credibility of witnesses, and all
justifiable inferences will be made in the non-moving party’s
favor.”10
2. Discussion
The McGills raise several arguments with regard to the
district court’s denial of their motion for summary judgment on the
issue of the validity of the foreclosure sale. The McGills first
8
United States ex. rel. Reagan v. E. Tex. Med. Ctr. Reg’l
Healthcare Sys., – F.3d —, 2004 WL 1959083, at *2 (5th Cir. Sept.
21, 2004).
9
Id. (citing FED. R. CIV. PROC. 56(c); Daniels v. City of
Arlington, 246 F.3d 500, 502 (5th Cir. 2001)).
10
Id. (citing Morris v. Covan World Wide Moving, Inc., 144
F.3d 377, 380 (5th Cir. 1998)).
6
argue that Hibernia never acquired title to the property from the
FDIC because the FDIC’s assignment to Hibernia was invalid. To
support this proposition, the McGills argue that the district court
erred when it admitted the APA between Hibernia and the FDIC as
evidence that the FDIC assigned the Deed of Trust to Hibernia. The
McGills also argue that the district court erred when it concluded
that the APA was a valid assignment to Hibernia because (1) it
lacked definiteness; (2) Levy failed to prove that the FDIC
delivered the assignment to Hibernia; and (3) Hibernia did not
record the assignment.
The McGills objected to the admissibility of the APA on
hearsay grounds. We review a district court’s ruling on
admissibility of evidence for abuse of discretion.11 The district
court did not abuse its discretion here. The McGills’ objection to
the APA as hearsay is meritless.12
A thorough review of the record reveals no reversible error in
the district court’s conclusion that the APA operated as a valid
assignment to Hibernia of the McGills’ note and Deed of Trust. The
11
See United States v. Pace, 10 F.3d 1106, 1115 (5th Cir.
1993).
12
See, e.g., Kepner-Tregoe, Inc. v. Leadership Software, Inc.,
12 F.3d 527, 540 (5th Cir. 1994) (“‘Signed instruments such as
wills, contracts, and promissory notes are writings that have
independent legal significance, and are nonhearsay.’ . . . The
admission of a contract to prove the operative fact of the
contract’s existence thus cannot be the subject of a valid hearsay
objection. To introduce a contract, a party need only authenticate
it.”).
7
McGills cite to Mississippi Code Annotated §§ 15-3-1(c) as support
for the proposition that the APA was not sufficiently definite to
convey the Deed of Trust to Hibernia.13 The McGills also cite
Mississippi Code Annotated 89-1-3 as support for the proposition
that the FDIC had to deliver the Deed of Trust to Hibernia.14 As
the district court noted, the language of these statutes indicates
that neither explicitly pertains to the assignment or transfer of
a security interest. Indeed, Section 15-3-1(c) mentions nothing on
“definiteness.” The McGills cite to no other authority to support
these arguments.
Neither do the McGills cite to any applicable authority to
support their argument that the parties had to record the
assignment.15 Although the McGills cite to Mississippi Code
Annotated § 89-5-29 as support for this proposition, we conclude
that the district court did not err when it found that the language
13
“An action shall not be brought whereby to charge a
defendant or other party . . . upon any contract for the sale of
lands . . . unless, in each of said cases, the promise or agreement
upon which such action may be brought, or some memorandum or note
thereof, shall be in writing, and signed by the party to be charged
therewith or signed by some person by him or her thereunto lawfully
authorized in writing.” MISS. CODE ANN. § 15-3-1(C).
14
“An estate of inheritance or freehold, or for a term of more
than one year, in lands shall not be conveyed from one to another
unless the conveyance be declared by writing signed and delivered.”
MISS. CODE ANN. § 89-1-3.
15
See Scruggs v. Northern, 85 So. 89, 91 (Miss. 1920) (noting
that the failure to record the assignment of a note secured by a
deed of trust does not affect the validity of the assignee’s
substitution of trustee).
8
of Section 89-5-29 requires that a party record only mortgage and
deed of trust documents themselves or documents that evidence a
substitution of trustee.16
The McGills also contend that the foreclosure sale itself was
invalid. To support this argument, the McGills argue that the
Substitution of Trustee instrument and the notice of the
foreclosure sale did not meet the requirements of Mississippi law,
because they did not (1) show how Hibernia acquired the benefit of
the Deed of Trust and (2) properly name the original beneficiary of
the Deed of Trust, First National.
Under Mississippi law, a foreclosure sale is presumed valid.17
The burden of proving invalidity is on the party who seeks to set
aside the foreclosure sale.18 To meet this burden, the party
attacking the validity of the sale must prove that the trustee
failed “to perform a necessary condition precedent to the valid
exercise of [the trustee’s] power of sale or there must exist an
16
“Except as hereinafter provided, all mortgages and deeds of
trust upon land given to secure the payment of money, and all
instruments of writing whereby a trustee is substituted under any
such deed of trust, and all instruments of writing canceling or
satisfying, or authorizing the cancellation or satisfaction of any
such mortgage or deed of trust, shall be recorded separately from
other instruments relating to land or records, and such records
shall be called ‘records of mortgages and deeds of trust on land.’”
MISS. CODE ANN. § 89-5-29.
17
See Myles v. Cox, 217 So. 2d 31, 34 (Miss. 1968).
18
See id.9
inadequate consideration plus inequitable circumstances.”19 As the
McGills do not allege that there existed “inadequate
consideration,” they must prove that the trustee failed to satisfy
a condition precedent to his power of sale.
We perceive no error in the district court’s conclusion that
the notice and advertisement of the foreclosure sale met the
requirements of Mississippi law. Like the district court, we have
found no law that requires a substitution of trustee instrument to
demonstrate —— in detail —— how the secured party obtained its
interest. There is no dispute that the parties properly recorded
the Substitution of Trustee instrument here; neither do the parties
dispute that the Deed of Trust allows the legal holder to appoint
a substitute trustee. The Substitution of Trustee instrument
clearly stated that Hibernia was the holder of the McGills’ note
and Deed of Trust. In addition, the instrument stated that the
then-current holder of the note and Deed of Trust was “Hibernia
National Bank, formerly First National Bank of Slidell,
Louisiana.”20 In sum, we conclude that the district court did not
err when it granted summary judgment in favor of Levy and against
the McGills on the validity of the foreclosure sale.
B. Bench trial
1. Standard of Review
19
Id.20
Record on Appeal 3:424.
10
We review bench trial findings of fact for clear error and
conclusions of law de novo.21
2. Discussion
As for the 62 lots to which they claim ownership under adverse
possession, the McGills argue on appeal that the district court
erred when it held that they failed to prove a hostile claim of
ownership for an uninterrupted period of ten years. To establish
a claim of adverse possession under Mississippi law, the claimant
has the burden of showing that his possession was (1) under a claim
of ownership; (2) continuous and uninterrupted; (3) hostile —— as
opposed to amicable and permissive —— possession; (4) open,
notorious, and visible; (5) peaceful; and (6) exclusive.22 The
claimant must establish, by clear and convincing evidence, each of
these elements for a period of ten years.23 The parties dispute
only three of these elements: (1) claim of ownership; (2) hostile
possession; and (3) continuous and uninterrupted possession.
The district court ruled that the McGills failed to prove by
clear and convincing evidence that they made a positive assertion
of a right hostile to Hibernia’s or Levy’s title sufficient to
21
Adams v. Unione Mediterranea di Sicurita, 364 F.3d 646, 655
(5th Cir. 2004) (quoting Baldwin v. Stalder, 137 F.3d 836, 839 (5th
Cir. 1998)).
22
See Martin v. Simmons, 571 So. 2d 254, 257 (Miss. 1990);
Cheatham v. Stokes, 760 So. 2d 795, 799 (Miss. Ct. App. 2000).
23
See MISS. CODE ANN. § 15-1-13(1); Rice v. Pritchard, 611 So.
2d 869, 871 (Miss. 1992).
11
overcome the presumption that a mortgagor who holds property after
a foreclosure sale is in permissive, as opposed to hostile,
possession.24 The district court also ruled that the McGills
fatally interrupted any period of hostile possession that they may
have begun when they acknowledged that Hibernia —— and then Levy ——
held title to the property.
After a careful consideration of the entire record and the law
applicable here, we can discern no error in the district court’s
holding.25 We are satisfied that the district court did not err in
holding that the McGills interrupted any alleged period of adverse
24
See, e.g., St. Regis Pulp & Paper Corp. v. Floyd, 238 So.
2d 740, 744 (Miss. 1970) (“Such permissive possession of lands,
even if long continued, does not confer title in the person in
permissive possession until a positive assertion of a right hostile
to the owner has been made known to him. The Mississippi courts
have held that a tenant at sufferance may not set up a hostile
claim of adverse possession based simply upon possession.”).
Further, the Mississippi Supreme Court has held that
[t]o acquire title by possession two things must occur,
to-wit, an occupation, actual or constructive, and a
claim of ownership. Neither is effectual without the
other. No continuance of occupation, no matter how long
protracted, will avail unless accompanied by claim of
title; and every presumption of law is that the occupant
holds in subordination and not adversely, to the true
owner.
Newman v. Smith, 84 So. 2d 512, 515 (Miss. 1956) (emphasis added).
25
Because we find dispositive the district court’s
determination that the McGills interrupted any alleged period of
adverse possession, we need not reach the issue whether a district
court —— under Mississippi law —— can determine an adverse
possession claim when it has not determined the boundaries to the
property. See Tutor v. Pannell, 809 So. 2d 748 (Miss. Ct. App.
2002) (reversing chancery court’s ruling on adverse possession
because chancery court made no determination as to boundaries of
property).
12
possession when Carl McGill acknowledged Hibernia’s title to the
foreclosed lots during his encounter with the Hibernia
representatives and when McGill Wellworks’s lawyer acknowledged
Levy’s title to the same property. Any acknowledgment by an
adverse possessor that the record owner of real property has title
is inconsistent with a claim of adverse possession.26 The
transcript of the January 10, 1992 videotaped encounter between
Carl McGill and the Hibernia representative reveals that Carl
repeatedly acknowledged Hibernia’s title to the foreclosed lots.
Further, in March 1994, David Oliver, attorney for McGill
Wellworks, wrote a letter to Levy in which he acknowledged that
Levy had acquired the foreclosed lots from Hibernia.27 The
district court did not err in this regard.
III. CONCLUSION
For the foregoing reasons, the judgments of the district are,
in all respects,
AFFIRMED.
26
Ford v. Rhymes, 103 So. 2d 363, 364 (Miss. 1958).
27
The letter informed Levy that “[t]his office has been
consulted by Dolan Trailer Park, a/k/a McGill Wellworks, Inc.
concerning perhaps unbeknownst to you a possible boundary dispute
which concerns the property which you have acquired from Hibernia
Bank.” Record on Appeal 3:513 (emphasis added).
13