NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 12a0381n.06
No. 11-5300
UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

F IF TH TH IRD BANK , P laintif f-App ellee,

v. D I A L P R OP ER TI ES , LLC; JOHN LA R R Y D I A L; JEFF DIAL,
Defendan ts-Appellants. ) ) ) ) ) ) ) ) ) ) ON AP P EAL FROM THE UNITED STAT ES DIS TRICT COURT F OR THE MIDDLE DISTRICT OF TENNESS EE

O P I N I O N

BEFORE: COLE an d McK EAGU E, Circuit Judges; and ZATKOF F , District Judge. *
P ER CURIAM . This is an appea l from a defic iency judgme nt rende red in favor of Plaintiff
Fifth Third Ba

nk. Def endant Dial Properties, L L C, executed a Construction P rom issory Note (“N ote”) by which the company rec eived $600,000 from Fifth Third B ank. The Note was secur ed by Dee d of Trust to a proper ty in Br entwood, Tenne ssee (“B rentwood proper ty ”) and g uara

nteed by Def endant John L arr

y Dial, Def endant Jeff Dia l, and David Dia l (“Gua rantors” ). Dial Properties and the Guar antors defa ulted when pay

ment ca me d u e . F if th T h ir d f o rec losed

on the Br entwood proper

ty and made a cre dit bid of $500,000 at a subsequent fore closure sale, which

was the win n i ng bid. Fifth Third then soug ht a defic iency judgme nt ag ainst Dial Properties and
Guar antors for the balanc e o f t h e amount owed, in addition to interest, costs, back taxes, and

The Honorable L awr ence P. Z atkoff, United States Di s t ri ct J udg e for the Eastern District * of Michig an, sitting by

desig nation.No. 11-5300

Fifth T hird Bank v. Dial Properties, LLC, et al.
appra isal and attorney fee s. Finding no g enuine dispute of ma terial fact, the district court gra nted Fifth Third’s motion for summary judgme nt and awa rded in damag es th e principal defic iency , interest, costs, and fees. Fifth Third Bank v. Dial Properties, L LC , No. 3: 09-cv- 01202 , 2011 WL
588148 (M.D. Tenn. Fe b. 10, 2011). Def endants appea l, arg uing that no defic iency exis ts beca use

an appra isal valued the Br entwood proper ty at $625,000, a value in excess of the outstanding loan.
We first note that Def

endant J eff Dial filed a Sugg estion of Ba nkruptcy during the pendenc y of this appea l. A bankruptcy petition opera tes as a stay of “the commence ment or continuation . .

. of a judicial, adm i n i s t ra t i v e, or other action or proce eding ag ainst the debtor

. . . .” 11 U.S.C. § 362(a) (1). We have held that “sec tion 362 should be rea d to stay all appea ls in proce eding s that wer e originall y brought ag ainst the debtor, reg ardle ss of whether the debtor is the appellant or appellee .” Cathey v. Johns–Manv ille Sales Corp ., 711 F.2d 60, 62 (6 th Cir. 1983). “Thus, whether a case is subject to the automatic stay must be deter mined at its inception.” Id. ; see also In re Delta Air Lines , 310 F.3d 953, 956 (6th Cir. 2002) (“To deter mine whether a proce eding is ‘ag ainst the debtor,’ the
court examines the posture of the case as it exis ted in the district court.” ). Be cause this a ction was orig inally broug ht ag ainst the debtor, J eff Dial, this appea l is stay ed as ag ainst him. We proce ed on the merits ag ainst the rema ining, solvent codef endants. In re Delta Air Lines , 310 F.3d at 956 (“I n the absenc e of unusual circ umstances, the automatic stay does not halt proce eding s ag ainst solvent codef endants.” ). The parties do not dispute the fac ts or the applicable law, only the application of the law to undisputed fac ts. Thus, the case is an appropr iate one for dispositi on on summary judgme nt. Fe d.
R. Civ. P. 56(a) (“The court shall g rant summary judgm en t i f t h e movant shows that there is no - 2 -No. 11-5300

Fifth T hird Bank v. Dial Properties, LLC, et al.
g enuine dispute as to any materia l fac t and the movant is entitled to judgme nt as a matter of law.”)

. Def endants’ a ssertions to the contra ry are without merit.
We now turn to the substance of the appea l. The parties ag ree Tenne ssee law applies, which

we briefly outline here

. The principles g overning defic iency judgme nts in Tenne ssee wer e laid out in Duke v. Daniels , 660 S.W .2d 793 (Tenn. Ct. App. 1983) a nd rea ffirme d in Lost Mountain Dev

. Co. v. King , No. M2004-02663-COA- R3-CV, 2006 WL 3740791 (Tenn. Ct. App. Dec

. 19, 2006): (1) [T] he value of the proper ty sold is not looked to in a defic iency case unless there is a char g e of fra

ud in the manner of sale or a char g e that the sales price was g rossly inadequa te; (2) in the absenc e of an alleg ation of irreg ularity in the sale, there is a presumption that the price broug ht at the publ i c s al e is the fair marke t price of the proper ty ; a nd (3) wher e g ross inadequa cy is c laimed, the burden of overc oming the presumption attache d to a sale fre e of irreg ularity is on the defe ndant ag ainst whom a def iciency judgme nt is sought. Lost Mountain, 2006 WL 3740791, at *5 (c iting Duke , 660 S.W .2d at 794-95). 1
Def endants have not arg ued that the sale itself was tainted by fra ud or irreg ularity , aside from
vag uely asser

ting that “some issue exis ts with Appellee ’s intentional actions knowing ly bidding less
at the fore closure.” Appellant Br

. at 10. Def endants offe r nothing more than repe atedly pointing out that Fifth Third possessed an appra isal valuing the proper ty at $625,000 befor e the sale but bid $500,000. Given that the appra isal took place more than two months befor e the forecl o s ure sale, expli citly noted that “the c urre nt market is charac terized by a decline i n demand . . . a nd a dec line in va lues in many marke t seg ments,” and examined the exterior of the building only , assuming the

Def iciency judgme nts in Tenne ssee are now g overne d by statute. See Tenn. Code Ann. § 1 35-5-118 (2012). T h e s t at u t e does not apply to this action beca use the Br entwood proper ty was fore closed on Aug ust 3, 2009, befor e the statute’s eff ective date on September 1, 2010. Both parties ag ree that Duke

and Lost Mountain apply here

. - 3 -No. 11-5300

Fifth T hird Bank v. Dial Properties, LLC, et al. interior was in g ood condition, t h e fa ct t h at Fifth Third’s bid was less than the appra isal value is

unrema rkable , much less an indica tion of fra ud.
As we find no irreg ularity in the sale, there is a presum p t i o n t hat $500,000 was the fair marke t value o f t h e Br entwood proper ty at the time of fore closure. Where g ross inadequa cy is claimed, as is here , Def

endants bear the burden of overc oming this presumption. Duke , 660 S.W .2d
at 795 (“[I ]f the defe ndant desired to overc ome that presumption by showing g ross inadequa cy , that burden of proof was on defe ndant.”)

. De fe n d an t s s eem to believe that mere ly coming up with an alterna tive value definitively rebuts such presump t i o n an d shifts the burden onto the Plaintiff to estab l i s h fa ir marke t price

. We find no such burden- shifting scheme in the g overning law. Any proofs a defe ndant submits to show gro s s inadequa cy will have the eff ect of either failing to

o v er co m e s u ch presumption, establishing the fore closure sale price as the fair marke t value, or

overc oming such presumption, in which case t h e fa i r marke t value become s an issue of fac t
prec luding summary judgme nt. See, e.g. , Lost Mountain , 2006 WL 3740791, at *11 (re versing g rant of summary judgme nt wher e defe ndant submitt ed sufficie nt proof of g ross inadequa cy , which raised dispute of fa ct as to ac tual fair va lue).
As proof of g ross inadequa cy , Def endants ha ve put forth the a fore mentioned exterior-only
appra isal and a 1 0 9 9 -A fo rm that lists the proper ty ’s fair marke t value at $625,000. The district
court found these insufficient t o es tablish g ross inadequa cy and acc ording ly g rante d summary judgme nt in favor of Fifth Third, calc ulating the defic iency amou n t based on the $500,000 sale price

. After car efully revie wing the applicable law, the rec ord, and the parties’ briefs, we conclude that the district court was corr ect. Be cause the distr i ct court thoroug hly analy zed the issue, a separ ate - 4 -No. 11-5300

Fifth T hird Bank v. Dial Properties, LLC, et al. opinion by this Court would serve no useful purpose. Thus, for t h e re as o n s stated in the district court’s opinion, we AF F IRM

.

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