SOUTHEAST ENTERPRISES2/13/1998
Southeast Enterprises, Inc. ("SEI"), a junior mortgagee, sought to redeem a tract of real property from Jerry and Sharron Byrd, who had purchased the property at a foreclosure sale. In computing the redemption price to be paid by SEI, the trial court began
with the purchase price the Byrds had paid; then it (1) added the balance of an outstanding higher-priority mortgage; (2) computed interest on the entire redemption price at the rate of 12%; (3) added permanent improvements made by the Byrds — at cost, instead of value; and (4) denied SEI any credit for the post-redemption rental value of the property or for timber cut by the Byrds. We affirm the trial court's inclusion of the higher-priority mortgage in the redemption price; reverse its computation of interest, its valuation of the permanent improvements, and its denial of credits for timber and rent; and remand.
The real estate consists of over 800 acres of farmland that was at one time owned by Hubert Prestwood, Jr., subject to a first mortgage held by the Farmers Home Administration ("FmHA"), second mortgages held by Hubert Prestwood, Sr., and India Prestwood, and two judgment liens. When FmHA foreclosed, the debt on the property exceeded $1 million. The Byrds purchased the property at a foreclosure sale for $480,000 paying $79,000 from their own funds and $401,000 obtained from a note secured by a mortgage to Colonial Bank.
SEI acquired assignments of at least one second mortgage and one or more judgment liens, thus obtaining a statutory right to redeem the property from the Byrds. See Ala. Code 1975, § 6-5-248. SEI gave notice of redemption to the Byrds and demanded a written statement of the debt and all lawful charges claimed by the Byrds. See Ala. Code 1975, § 6-5-252. The Byrds provided SEI with the written statement, listing numerous lawful charges.
In October 1995, SEI filed a complaint seeking redemption, contesting several of the charges listed on the Byrds' statement. The trial court entered a judgment on September 13, 1996, computing the redemption price as follows:
Purchase price paid by the Byrds (including interest at 12%) $593,218.15 FmHA mortgage balance (including interest at 12%) 592,986.77 Permanent improvements taxes, etc., at cost 102,972.62 Credits for timber and rent ( -0- ) ------------- Total redemption price $1,289,177.54
SEI moved for a new trial. The trial court denied its motion, and SEI appealed.
I. Balance of Higher-Priority Mortgage
SEI first contends that it is not required to include in the redemption price the higher-priority mortgage owned by FmHA. Specifically, SEI argues that Ala. Code 1975, § 6-5-253, does not require it to pay a higher-priority mortgage that is not owned by the purchasers at the foreclosure sale, the Byrds. See St. Clair Indus., Inc. v. Harmon's Pipe & Fitting Co., 282 Ala. 466, 213 So.2d 201 (1968); Fonde v. Lins, 259 Ala. 553, 67 So.2d 834 (1953); Stewart v. Stephenson, 243 Ala. 329, 10 So.2d 159 (1942); Estes v. Johnson, 234 Ala. 191, 174 So. 632 (1937). We disagree.
After real property is sold at a foreclosure sale to pay the encumbrances on it, various parties may redeem that property from the purchaser by paying the appropriate redemption price. Ala. Code 1975, § 6-5-248. The redemption price includes taxes, the value of improvements, and certain outstanding encumbrances. Ala. Code 1975, § 6-5-253. The cases cited by SEI interpreted the language of former § 6-5-235:
"(3) Any other valid lien or incumbrance paid or owned by such purchaser or his vendee, or any mortgagee of the purchaser to the extent of the amount necessary to redeem."
(Emphasis add
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