Rioprop Holdings, LLC v. Compass Bank

Citation: 256 So. 3d 674Docket: 2160673

Court: Court of Civil Appeals of Alabama; January 11, 2018; Alabama; State Appellate Court

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Rioprop Holdings, LLC appeals a judgment from the Baldwin Circuit Court favoring Compass Bank and Walter K. Striplin in a title dispute over a unit in the Dunes Condominiums. The trial court ruled that Rioprop was divested of any interest in the property, confirming Striplin's fee-simple title. The background reveals that Striplin owned the property in 2007, with Compass holding a mortgage on it. After Striplin failed to pay property taxes, a tax sale occurred in May 2008, where Plymouth Park Tax Services purchased the property but did not take possession or notify Compass. Plymouth later obtained a tax deed and transferred its interest to Propel Financial, LLC, which was subsequently acquired by Rioprop in 2014 or 2015. 

Rioprop filed a civil action in February 2016, alleging five counts, including claims for a lien on the property, ejectment of other claimants, quiet title, and unjust enrichment based on taxes paid since acquiring the property. Compass and Striplin moved to dismiss the ejectment and quiet-title claims on statute of limitations grounds, which the trial court granted. Compass counterclaimed, arguing Rioprop's interest was time-barred and that any interest had vested in Striplin, subject to Compass's mortgage.

An ore tenus hearing took place on April 17, 2017, regarding Rioprop's claim for reimbursement of $117,372.79 for the purchase and expenses related to the property. However, Rioprop’s in-house counsel admitted a lack of supporting documentation for this claim, including insurance policies and receipts.

Lassen testified that Rioprop did not demand possession of the property from Striplin. On May 1, 2017, the trial court ruled in favor of Striplin regarding Rioprop's claim of having a priority lien on the property, denying Rioprop's request to establish a lien under Alabama Code sections 40-10-70 and -76. The court found in favor of Rioprop's unjust enrichment claim, ordering Striplin to pay $5,190.36, and transferred all interest in the property to Striplin, declaring fee simple absolute ownership. The court stated that the judgment resolved all matters for all parties involved. Rioprop appealed, arguing that the trial court incorrectly dismissed its claims for ejectment and quiet title. Rioprop contended that the trial court's order lacked clarity regarding the legal or factual basis for its decision. Compass and Striplin asserted that these claims were time-barred. They referenced Alabama Code sections 40-10-29 and -82, which stipulate that actions to recover real estate sold for taxes must be filed within three years of the purchaser's entitlement to a deed, with specific exceptions for owners under disability. The court's standard for dismissing claims based on the statute of limitations requires that the affirmative defense be clearly evident in the pleadings.

Landowners seeking to redeem property do not need to maintain actual and peaceful possession; constructive possession can suffice. Constructive possession is linked to the title held by the original owner and can only be negated by the tax purchaser's adverse possession lasting three years after entitlement to possession. The Alabama Supreme Court has previously ruled on similar claims, as seen in *Reese v. Robinson*, which clarified that actions to recover land sold for taxes must be initiated within three years of the tax purchaser's entitlement to demand a deed. This statute, 40-10-82, is interpreted as a short statute of limitations, requiring the tax purchaser to possess the property exclusively and adversely for three years to cut off the landowner's redemption rights. If a taxpayer/landowner remains in possession for three years post-entitlement, title is vested in the landowner, protecting them from recovery actions by the tax purchaser. The appellate court is bound by the Alabama Supreme Court's interpretation, regardless of differing views. Additionally, the federal bankruptcy court reaffirmed that the statute of limitations can bar a tax purchaser’s ejectment action and restore legal title to the landowner. Historical cases illustrate these principles, such as in *Johnson v. Stephens*, where heirs retained rights to property due to the father’s continuous adverse possession until his death, despite prior tax sales.

When property is sold in Alabama due to tax non-payment, the debtor has three years to redeem their interest without losing legal title through administrative redemption. If the debtor does not redeem within this period, the tax purchaser can demand a tax deed, extinguishing the debtor's legal interest. The tax purchaser gains possession upon purchase. If the purchaser obtains a tax deed and maintains adverse possession, the debtor has three years to redeem the property via judicial action. Conversely, if the debtor has constructive possession, they retain the right to redeem as long as they maintain that possession. If the tax purchaser holds a tax deed but the debtor remains in adverse possession, the title reverts to the debtor unless the purchaser files an ejectment action within three years.

In the case of Rioprop, which purchased property at a tax sale on May 27, 2008, it was entitled to a tax deed by May 27, 2011, and could seek to quiet title by May 27, 2014, if it had maintained adverse possession or filed an ejectment action. Rioprop, however, did not file for ejectment until February 4, 2016, after the limitations period had expired. Additionally, Rioprop's complaint indicated it only had constructive possession as the tax deed holder, not adverse possession. The court noted that Alabama law, specifically Title 40, Chapter 10 of the Alabama Code, governs ownership and possession in tax sale disputes, as established in Gulf Land Co. v. Buzzelli. The court emphasized that constructive possession follows the original owner's title unless cut off by the tax purchaser's adverse possession.

To bar redemption under statute 40-10-83, a tax purchaser must demonstrate continuous adverse possession for three years following entitlement to demand a tax deed, as established in Stallworth. This requirement applies to properties purchased from both the State and the tax collector. The court found that Rioprop's claims for ejectment and to quiet title were filed nearly two years after the limitations period had expired under 40-10-82, thus affirming the trial court's dismissal of those claims without addressing Rioprop's additional arguments on appeal.

Rioprop contended that the trial court wrongfully divested it of property interest without ruling on Striplin's redemption motion or determining the redemption amount. However, the court noted that Striplin had possessed the property for three years after Rioprop's entitlement to the tax deed, thus vesting title in Striplin under 40-10-82, regardless of Rioprop's inaction. Rioprop was erroneous in asserting that Striplin was required to pay to redeem the property after such re-vesting.

Additionally, Rioprop claimed entitlement to a lien for expenses incurred, including property taxes, arguing it inherited the State's lien priority upon acquiring the tax deed. The court found no legal basis for maintaining a lien on property after the tax purchaser lost its interest due to failure to act within the limitations period. The statutes do not support Rioprop’s claim to a lien after the property reverted to the landowner. No authoritative backing was found for Rioprop's assertion of stepping into the State's position regarding liens.

Rioprop's argument that it took on the State's rights is unsupported, as the relevant language is found only in a dissenting opinion by Justice Maddox. After reviewing the case, the court concluded there is no legal justification for Rioprop to establish a lien for expenses incurred in its property acquisition efforts. The trial court's denial of Rioprop's lien request is upheld, affirming that Rioprop did not prove any error in relinquishing rights to the property, which was awarded to Striplin in fee simple absolute. The court affirmed the trial court's judgment. Additionally, Henrietta Jordan and Wesley Acee were named as defendants along with Branch Banking and Trust (BB&T), the U.S. government, and Sage Development, LLC. Jordan and the U.S. filed disclaimers of interest, while Acee, BB&T, and Sage did not respond or appear at trial. Rioprop's motions to dismiss did not raise issues regarding the timeliness of the claims.