April 2024 Judicial Update

April 2024 Judicial Update

As always, AAR’s Legal Team has been monitoring the appellate courts to update Alabama REALTORS® about cases that could impact their businesses. Read the latest Judicial Update to learn about cases from here in Alabama as well as the Supreme Court of the United States.


United States Supreme Court


Fair Credit Reporting Act

The United States Supreme Court has begun issuing its 2024 opinions. One of the first opinions of the year, Dep’t of Agriculture Rural Development Rural Housing Service v Kirtz, relates to the Federal Credit Reporting Act of 1970 (FCRA). The FCRA is intended to help consumers who are affected by incorrect information being reported about their credit. The FCRA allows consumers to sue “any person” who willfully or negligently delivers false information to an entity that generates credit reports. In this case, Kirtz obtained a USDA loan on which he made proper payments. However, the USDA provided incorrect information to TransUnion about Mr. Kirtz’ payment history. This incorrect information resulted in a decrease in Mr. Kirtz’ credit score. He notified both the USDA and TransUnion of the error, but alleged that the USDA failed to take any action. Mr. Kirtz sued the USDA and the USDA argued to have the suit dismissed based on sovereign immunity. (Sovereign immunity is a legal doctrine that, loosely put, states that the government can only be sued in certain circumstances.) Ultimately, the Supreme Court sided with Mr. Kirtz and found that the Federal Credit Reporting Act allows consumers to sue anyone who violates it, including the federal government.


The Taking Clause

The United States Supreme Court recently issued two different opinions related to the Takings Clause of the Constitution, Sheetz v County of El Dorado, CA and DeVillier v Texas.

In Sheetz, a California man and his wife wanted to obtain a building permit to build a prefabricated home on their property. The county stated that the building permit would only be issued upon payment of a $23,420 traffic impact fee. The fee was not based on the impact on traffic that Sheetz’ particular project was expected to cause. Rather, it was calculated using a schedule created by the county’s Board of Supervisors that considered only the type of development and its location. Sheetz argued that the large fee constituted a taking because it did not take the circumstances of the particular project into account when determining the fee. The Supreme Court agreed, saying that “the Takings Clause saves individual property owners from bearing ‘public burdens which, in all fairness and justice, should be borne by the public as a whole.’” (internal citation omitted). The Court went on to say that the government may impose conditions on permits that serve a legitimate police power purpose, but not conditions that are “unrelated to [the government’s] legitimate land-use interests. For a condition on a permit to be valid, the condition must be connected and roughly proportional to the government’s needs. In this case, since the fee amount was not calculated in proportion to the government’s traffic abatement needs related to Sheetz’ specific project, the fee was invalid.

In DeVillier, a group of property owners sued the State of Texas after their properties were damaged by floodwater. The properties in question are located north of I-10 between Houston and Beaumont, Texas, in an area that is prone to flooding. The State of Texas sought to use I-10 as a flood evacuation route, so it constructed a 3-foot barrier in the median of I-10 that acts as a dam against floodwaters. The barrier was successful in preventing I-10 from being flooded, but it caused the properties north of the interstate to severely flood and sustain significant damage. DeVillier and the other property owners argued that by using their properties to store stormwater, Texas had effected a taking of their property. The Supreme Court agreed, specifically finding that the property owners had a cause of action under Texas state law. The Court did not address whether the property owners would have a cause of action under the U.S. Constitution.


Alabama Supreme Court


Valuation Challenges

The Alabama Supreme Court recently ruled on a case in which a petrochemical plant owner disputed the County Revenue Commissioner’s valuation – and therefore ad valorem taxes owed – on the plant. In Morgan County Board of Equalization v Indorama Ventures Xylenes & PTA, LLC, a petrochemical company, Indorama, disputed the ad valorem taxes assessed for two consecutive years for Indorama’s personal property at its plant. Indorama first appealed to the Board of Equalization, who ruled against Indorama, and subsequently appealed to the circuit court. At trial, Indorama put on ample evidence about the multiple valuation methods that professional valuation businesses used when calculating the property’s value. The county appraisers testified that they calculated the property’s value using the method prescribed by the Department of Revenue’s manual, which involved using a standard depreciation scale. The circuit court ruled in Indorama’s favor and accepted Indorama’s valuation of the property, and the Board of Equalization appealed. The Alabama Supreme Court agreed with Indorama’s valuation and ruled in its favor. In coming to this decision, the Court noted that circuit courts are not constrained by the Department of Revenue’s preferred valuation method and are instead free to consider all possible evidence, including other valuation methods.


Breach of Contract

The Alabama Supreme Court also issued a ruling in NSH Corporation v City of Calera, a case involving an alleged breach of contract. In 2005, a developer began constructing a new neighborhood in Calera. Before the project was completed and while the roads in the neighborhood were still unfinished, the developer went bankrupt. The bank foreclosed on the property and sold many of the open lots to a builder, NSH. Soon after NSH purchased the lots, the city stopped issuing building permits to NSH, saying that the roads must be completed before more permits could be issued. NSH, the bank, and the city then entered into a contract that stated that the bank would pay up to $58,000 to complete the roads and that NSH would cover any additional costs. However, the bank never ordered any work done on the roads. The city sent a demand to NSH that NSH coordinate with the bank to have the road construction completed. NSH did not respond. The city sued NSH, arguing that NSH breached its duty under the contract that it had with the city and the bank. NSH argued that their only responsibility was to pay costs over and above $58,000, which did not exist at the time of the lawsuit. Therefore, NSH argued, they couldn’t have breached the contract. The Alabama Supreme Court agreed with NSH. Since any costs for NSH were then-unknown, NSH had not breached any contractual obligation.


Boundary Dispute

The Alabama Supreme Court also recently ruled in Phoenix East Association v Perdido Dunes Condo. Association, a case involving a boundary dispute between two condominiums. In 1984, Perdido Dunes (a condominium association) built a condominium that it believed to be entirely on its own property, but whose power poles and sewer lines extended 2.5 feet into the neighbor, Phoenix East’s, property. A survey in the mid-1990s revealed the issue, but Phoenix East continued to allow the Perdido Dunes to use the 2.5-foot strip of land in question. When Perdido Dunes’ condominium had to be rebuilt due to hurricane damage, litigation between the two condominiums began. Perdido Dunes argued that it had acquired the strip of land by prescriptive easement. Phoenix East argued that the Condominium Act (Alabama Code § 35-8A-207(e)) prohibits easements of this kind and that Perdido Dunes had failed to demonstrate that it had a prescriptive easement. The Alabama Supreme Court ruled against all Phoenix East’s arguments. The Court clarified that the Condominium Act does not prohibit all encumbrances (such as easements) against condominiums. Rather, it prohibits encumbrances that untether “a unit owner’s interest in [a] common element from the owner’s interest in the unit itself” (for example, a unit owner could not sell their interest in the communal pool unless they simultaneously sold the unit that their interest in the property comes from). The Court further found that Perdido Dunes had established a prescriptive easement by demonstrating that Perdido Dunes had used the strip of land continuously and without Phoenix East’s permission (but with its knowledge) for more than 20 years.


Alabama Court of Civil Appeals


Nuisance Abatement Appeals

The Alabama Court of Civil Appeals considered a case stemming from the condemnation of a property. In Heckathorn v City of Homewood, an abatement board ruled that a building that Ms. Heckathorn owned was a public nuisance that must be remedied, or the building would be demolished. Ms. Heckathorn requested a review of the ruling and was granted a hearing. Following that hearing, the abatement board issued an order that the building must be demolished. Ms. Heckathorn appealed the decision to the Circuit Court. Alabama Code § 11-53A-3(b) allows for an appeal of an abatement board’s decision to the Circuit Court if a notice of appeal is filed and “bond for security of costs in the form and amount approved by the circuit clerk” is paid. Ms. Heckathorn filed her notice of appeal but was never instructed by the circuit clerk’s office to pay a bond for security of costs. The City of Homewood attempted to have the appeal dismissed because Ms. Heckathorn did not pay the bond. Ms. Heckathorn argued that she couldn’t pay a sum that she was never asked to pay, but that she would pay it at any time that the court requested. The circuit court dismissed Ms. Heckathorn’s appeal for failure to pay the bond. However, the Alabama Court of Civil Appeals reversed the decision, finding that the circuit court had jurisdiction over the case upon Ms. Heckathorn filing her notice of appeal.


Unlawful Detainers

The Alabama Court of Civil Appeals recently issued a ruling in a case related to unlawful detainer actions brought by a landlord. In Ross v Baker, Baker, and Benson, a landlord filed an unlawful detainer action against his tenants without being represented by an attorney. Existing Alabama caselaw states that a landlord must be represented by an attorney to be able to file an unlawful detainer action on behalf of a housing authority. The tenants in question argued that the action should be dismissed because it was not filed through an attorney. The landlord argued that he was not bringing the case on behalf of a housing authority, but rather was bringing the case in his individual capacity as landlord. As a result, the landlord argued, he was not required to be represented by counsel. The Alabama Court of Civil Appeals agreed with the landlord. If a landlord brings an unlawful detainer suit on behalf of him/herself as landlord, (s)he is not required to be represented by an attorney. (However, even so, AAR strongly recommends that any landlord who is considering an unlawful detainer action consult an attorney.)


Attorney's Fees for Trespass Actions

In Caldwell v McCartney, a woman filed a lawsuit against her neighbor, arguing that he had trespassed on her land and requesting that the boundary line between her land and her neighbor’s land be established. The woman won at a trial and the circuit court awarded damages in her favor. The court also awarded attorney’s fees and costs to the woman. The neighbor appealed the requirement that he pay attorney’s fees and costs. The Court of Civil Appeals agreed with the neighbor, reiterating Alabama case law that “a prevailing party may not recover attorney fees and costs as an element of damages for trespass to real property.” The Court did not change the verdict or the boundary line determination, but it did prohibit assessing attorney fees and costs against the neighbor.