D.A.D., Inc. v. Poole

Ryall Grows, Inc. (RGI), as senior mortgagee, filed a foreclosure action. In the foreclosure complaint, RGI alleged that D.A.D., Inc. (DAD) (plaintiff) and Willie Poole (defendant), among others, had inferior interests in the property subject to foreclosure (the subject property). An inferior creditor is a person or entity who holds an interest against a person or property that is inferior to the interest held by the top-priority creditor. DAD’s interest was a junior mortgage, also called an inferior mortgage, and Poole was a judgment creditor. DAD’s mortgage was recorded several months before Poole’s judgment. DAD chose not to foreclose its mortgage by crossclaim in RGI’s action. The trial court entered a final foreclosure judgment in RGI’s favor. In the final order, the trial court ordered that the subject property be sold, that RGI’s mortgage be fully satisfied, and that any remaining sale proceeds be retained by the court clerk subject to distribution among the inferior creditors. DAD and Poole each filed motions to distribute the surplus, and each asserted that their lien had priority. The trial court held that, even though DAD’s junior mortgage was recorded before Poole’s judgment, Poole’s judgement had priority-of-lien because DAD failed to foreclose its junior mortgage by crossclaim in RGI’s foreclosure action. DAD appealed, arguing that DAD was not required to foreclose its mortgage by crossclaim in order to preserve its priority-of-lien to the surplus sale proceeds.