The Alabama Supreme Court issued its weekly release list on Friday, April 11. The opinions of interest to the Alabama business community include the following:
- Faust v. Woods Props. & Investments, LLC: This case concerns ad valorem tax classification of property—and, particularly, vacation homes—that are transferred into LLCs and similar corporate entities. After a married couple transferred their Orange Beach condo to their LLC, Baldwin County reclassified the condominium as non-residential property, resulting in a significant tax increase. The LLC brought a class action asserting that the condominium should have retained its classification as a “residential property.” The Circuit Court agreed, based in part on evidence that the condominium was not rented to any third party, and granted summary judgment for the LLC. In a 5-0 opinion by Justice Shaw, the Court reversed and remanded for further proceedings. It reasoned that “residential property” is limited to property used “exclusively as the owner’s single-family dwelling” and that because corporate entities are incapable of “dwelling” in condominiums, a condominium owned by such an entity is not “residential.”
- Hembree Insurance Trust v. Maples Industries: This case addresses the consequences from a commercial landlord’s transfer of its property after entering into the lease. The landlord in this case sued the tenant for breach of a lease, and the Circuit Court of Jackson County had entered summary judgment for the tenant, reasoning that the lease was voided when the landlord transferred its interest to a separate LLC. In a 5-0 opinion by Chief Justice Stewart, the Court reversed and remanded for further proceedings, reasoning that the tenant was estopped from challenging the landlord’s enforcement of the lease because the tenant had entered into the lease with, and was placed in possession of the property by, the landlord. The Court also reasoned that it was possible that the landlord, as the owner of the LLC to which the property was transferred, held an interest sufficient to enforce the lease.
