        IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI

                              NO. 2013-CA-00510-COA

WESTFORD ASSET MANAGEMENT, LLC,                                         APPELLANTS
ADAMS INTERNATIONAL TRADING, LTD
AND JEFFERSON HOLDINGS
INTERNATIONAL, INC.

v.

BATSON & BROWN, INC.                                                       APPELLEE


DATE OF JUDGMENT:                        01/29/2013
TRIAL JUDGE:                             HON. DALE HARKEY
COURT FROM WHICH APPEALED:               JACKSON COUNTY CIRCUIT COURT
ATTORNEYS FOR APPELLANTS:                ROBERT THOMAS SCHWARTZ
                                         JEFFREY MONROE WILLIAMS
                                         W. WAYNE DRINKWATER JR.
                                         MARGARET OERTLING CUPPLES
                                         JEFFREY WARD BERTUCCI
                                         SIMON TURNER BAILEY
ATTORNEY FOR APPELLEE:                   A. MALCOLM N. MURPHY
NATURE OF THE CASE:                      CIVIL - REAL PROPERTY
TRIAL COURT DISPOSITION:                 FOUND THAT APPELLEE’S LIEN HAS
                                         PRIORITY OVER APPELLANTS’ DEED OF
                                         TRUST AND AWARDED APPELLEE
                                         ATTORNEY’S FEES
DISPOSITION:                             REVERSED AND RENDERED - 04/21/2015
MOTION FOR REHEARING FILED:
MANDATE ISSUED:

      BEFORE IRVING, P.J., ROBERTS AND MAXWELL, JJ.

      ROBERTS, J., FOR THE COURT:

¶1.   This case involves a priority dispute among creditors regarding property in Jackson,

County, Mississippi. Westford Asset Management LLC loaned money to real-estate

developers. After the developers defaulted on their loan, Batson & Brown, an engineering
firm, filed a lien against the property. However, Batson & Brown later released its lien so

Westford could conduct a foreclosure sale. Batson & Brown and Westford both agreed that

the foreclosure sale would not affect their respective priority rights.

¶2.    Westford bought the property at the foreclosure sale. The Jackson County Circuit

Court found that Westford’s bid was commercially reasonable, and all of the loan proceeds

went into the project. However, the circuit court also found that Westford purchased the

property subject to Batson & Brown’s lien. The circuit court also ordered Westford to pay

Batson & Brown’s attorney’s fees. Westford appeals. We find the circuit court erred when

it held that Westford acquired the property subject to Batson & Brown’s lien. It follows that

we find that the circuit court erred when it ordered Westford to pay Batson & Brown’s

attorney’s fees. Accordingly, we reverse the circuit court’s judgment and render a judgment

in favor of Westford.

                        FACTS AND PROCEDURAL HISTORY

¶3.    In August 2004, Ocean Golf Investors LLC and Pine Island Inc. began a real-estate

development called the Bayou Grand Project (the project). It involved merging several

smaller parcels into a single master development for the construction of homes,

condominiums, resort hotels, and a golf course. Ocean Golf hired TDX Construction

Corporation as the construction manager. TDX was also responsible for approving payment

of contractors’ invoices. Batson & Brown was hired to provide engineering services.

¶4.    Ocean Golf obtained financing through Westford Asset Management.1 There were

       1
       Westford owns Westford Funds, which owns Adams International Trading Ltd.
Adams owns Jefferson Holdings International Inc.

                                              2
six loan transactions over the course of thirty months. All of the loans were secured by the

same deed of trust. A substantial portion of the funds went toward administrative fees,

expenses, and prepaid interest.

¶5.    The first loan transaction was in June 2005. The proceeds of that loan paid a prior

loan from another lender, provided Ocean Golf with money for site development and

planning costs, and accounted for various fees, expenses, and prepaid interest associated with

the transaction. Similar transactions occurred between July 2006 and December 2007. In

total, Westford loaned Ocean Golf approximately thirty-seven million dollars. Batson &

Brown never recorded a construction lien or filed a lis pendens notice at any time during the

loan transactions.

¶6.    Before the sixth loan transaction, Ocean Golf defaulted on its obligations to Westford.

Around the same time, Ocean Golf failed to pay contractors and consultants for their work

on the project. Even so, Ocean Golf persuaded them to keep working. For several months,

Ocean Golf told the contractors and consultants that Ocean Golf would obtain additional

financing through another company, so Ocean Golf would be able to pay its debts. That

never happened. Ocean Golf defaulted after the sixth loan transaction, so Westford was

entitled to foreclose. In February 2008, Batson & Brown filed a notice of construction lien

for approximately $222,000.

¶7.    In March 2008, TDX sued Ocean Golf and Westford. TDX sought to enforce its lien.

Later, TDX amended its complaint and added Batson & Brown as defendants. A flurry of

responsive pleadings resulted in a priority dispute over the property. Westford asserted that



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it had priority, and it sought a judicial foreclosure. Ocean Golf allowed Westford to obtain

a default judgment.

¶8.    In July 2011, Westford and Batson & Brown filed a joint motion to authorize the

release of Batson & Brown’s lien to allow Westford to conduct a foreclosure sale. The joint

motion contemplated that Westford would sell the property free of liens. After the

foreclosure sale, Batson & Brown could enforce whatever rights it had – which would be

determined at trial – against a $900,000 bond that Westford would post.2 The intent of the

joint motion was to make the property more marketable and maximize the value of the

property during the foreclosure sale. The parties agreed that the joint motion would not

affect any of the parties’ claims.

¶9.    In September 2011, the circuit court entered a foreclosure order and authorized the

foreclosure sale. The foreclosure order also found Ocean Golf in default. Additionally, the

circuit court ordered Westford to post the $900,000 bond, and ordered Batson & Brown to

release its lien. Additionally, the foreclosure order let the parties continue litigating their

priority dispute – only now against the bond, instead of the property. Otherwise, the

foreclosure order stated that it did not affect the parties’ claims. According to the foreclosure

order, the bond was only to be drawn upon if the circuit court found that Batson & Brown’s

lien had priority over Westford’s deed of trust. If not, the bond was to be released and

discharged. Westford posted the bond. Batson & Brown released its lien.



       2
       The $900,000 bond was intended to stand in the place of the property. The bond
would only be drawn upon to the extent that a final judgment determined that Batson &
Brown’s lien was superior to Westford’s deed of trust.

                                               4
¶10.    The foreclosure sale occurred during May 2012. Westford submitted the only bid.

It was for thirty-two million dollars. Westford obtained a clear title to the property free of

any liens via the commissioner’s deed. Ocean Golf still owes Westford approximately

twenty million dollars. In June 2012, the circuit court confirmed the effect of the foreclosure

sale.

¶11.    A two-day bench trial began on August 20, 2012. Ultimately, the circuit court entered

a judgment in favor of Batson & Brown. To be precise, the circuit court found that

Westford’s deed of trust predated all liens. The circuit court also found that the loan

proceeds went toward construction of the project. Consequently, the circuit court held that

Westford had priority before the foreclosure sale.

¶12.    However, the circuit court held that Westford bought the property subject to Batson

& Brown’s lien because Westford knew that there was an outstanding construction lien.

Despite acknowledging that Batson & Brown had released its lien before the foreclosure sale,

the circuit court reasoned that Batson & Brown could satisfy its lien from the bond. The

circuit court acknowledged that Batson & Brown’s lien was not filed within twelve months

of becoming due, but the circuit court held that Westford had waived the timeliness of the

lien because Westford did not bring it to the circuit court’s attention sooner. Including

attorney’s fees, the circuit court awarded Batson & Brown approximately $340,000 – which

was to be paid from the bond. Westford appeals.

                                STANDARD OF REVIEW

¶13.    “A circuit judge sitting without a jury is accorded the same deference with regard to



                                              5
his findings as a chancellor, and his findings are safe on appeal where they are supported by

substantial, credible, and reasonable evidence.” City of Clinton v. Smith, 861 So. 2d 323, 326

(¶16) (Miss. 2003). But “where the trial judge has applied an erroneous legal standard, we

should not hesitate to reverse.” Quitman Cnty. v. State, 910 So. 2d 1032, 1035 (¶6) (Miss.

2005). We review questions of law de novo. Stewart ex rel. Womack v. City of Jackson, 804

So. 2d 1041, 1046 (¶8) (Miss. 2002).

                                        ANALYSIS

       I.     FORECLOSURE SALE

¶14.   Westford argues that the circuit court erred by resolving the priority dispute in favor

of Batson & Brown. Westford notes that the circuit court’s foreclosure order said that the

foreclosure sale would have no impact on the priority that existed before the sale.

Additionally, Westford argues that notwithstanding the foreclosure order, a purchaser at a

foreclosure sale does not buy foreclosed property subject to outstanding construction liens.

Consequently, Westford reasons that its deed of trust had priority over Batson & Brown’s

construction lien.

¶15.   “The lien of a deed of trust securing a construction loan has priority over mechanics’

and materialmen’s liens only to the extent that: (a) the funds disbursed actually went into the

construction, or (b) to the extent that the construction lender used reasonable diligence in

disbursing the construction loan.” Peoples Bank & Trust Co. v. L&T Dev. Inc., 434 So. 2d

699, 707 (Miss. 1983). However, a conveyance via a trustee’s deed following foreclosure

is subject to a lien when the mortgagee’s bid during the foreclosure sale is “so shockingly



                                              6
low” that it is voidable. Id. at 711. Similarly, a conveyance following foreclosure may be

subject to a lien “where the mortgagee has been guilty of other similarly inequitable

conduct.” Id.

¶16.   The joint motion for the foreclosure sale stated that the joint motion would not affect

the parties’ claims. The circuit court’s corresponding order also said that the foreclosure sale

would not affect the parties’ claims. After the foreclosure sale, the circuit court authorized

the sale and found that Westford’s thirty-two-million-dollar bid was “commercially

reasonable.” The circuit court certainly did not find that Westford’s bid was “shockingly

low.” Likewise, the circuit court did not find that Westford had engaged in any inequitable

conduct. And the circuit court found that all of the loan proceeds went into the project.

Batson & Brown vigorously argue that the loan proceeds did not go into the project, because

a significant portion of the proceeds went toward prepaid interest, loan-origination fees, and

refinancing fees. However, the circuit court expressly found that all of the loan proceeds

went into the project. Batson & Brown did not appeal the circuit court’s decision. Because

the circuit court found that all of the loan proceeds went into the project, and Westford’s bid

was not “shockingly low,” the circuit court erred when it held that Westford acquired title

to the property subject to Batson & Brown’s lien. Consequently, we reverse the circuit

court’s judgment and render a judgment in Westford’s favor.

       II.      TIMELINESS OF THE LIEN

¶17.   In this issue, Westford claims that the circuit court mischaracterized the timeliness of

Batson & Brown’s lien as though it was an affirmative defense. Westford argues that the



                                               7
timeliness of a lien is an element of a claim to enforce a lien. Accordingly, Westford claims

that Batson & Brown bore the burden of proving that its lien was timely. Because Batson

& Brown did not prove that its lien was timely, Westford argues that the circuit court erred

by finding that the lien had priority over Westford’s deed of trust. Based on our resolution

of Westford’s first issue, this issue is moot.

       III.   ATTORNEY’S FEES

¶18.   Finally, Westford claims that the circuit court erred when it awarded Batson & Brown

attorney’s fees. Based on our resolution of Westford’s first issue, we find that the circuit

court erred when it awarded Batson & Brown attorney’s fees. Therefore, we reverse the

circuit court’s judgment in that regard, as well.

¶19. THE JUDGMENT OF THE JACKSON COUNTY CIRCUIT COURT IS
REVERSED AND RENDERED. ALL COSTS OF THIS APPEAL ARE ASSESSED
TO THE APPELLEE.

     LEE, C.J., GRIFFIS, P.J., BARNES, ISHEE, CARLTON, MAXWELL AND
FAIR, JJ., CONCUR. IRVING, P.J., CONCURS IN PART AND IN THE RESULT
WITHOUT SEPARATE WRITTEN OPINION. JAMES, J., CONCURS IN PART
WITHOUT SEPARATE WRITTEN OPINION.




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