### IN THE COURT OF APP EALS OF TENNESS EE ATJAC KSON JA NUA RY22, 201 0 S es sio n JO HN SKI PPER and BRENDA SKI PPER v. WE LLS FARGO BANK, N.A.

D irec t A p p ea l f

ro m th e C h a n ce ry C o u rt fo r S h elb y C o u n ty N o. C H - 07- 1599- I W al t er L. E vans, C hancel l or

N o. W 2009- 01786- C O A - R 3- C V - F i l ed A pri l 15, 2010

W ell s F arg o p u rch ase d fore clos ed p rop erty, w h ich it then so ld to the S k ipp ers. T h e S k ipp ers con t ract ed to sel l t he p ropert y, bu tbefore t he sal e w as com plet ed, t w o IR S t ax li ens aga i nst the p rev iou s o w n ers w ere d isco v ere d

. T h e S k ipp ers su ed W ell s F arg o , an d the tri al co u rt aw ard ed them their l o st pro fi ts from the an ti cipa ted sale. W ell s F arg o ap p ea ls, an d w e a ffi rm i n par tand r ever s e i n par tand r em and.

T enn. R . A pp. P . 3; A ppeal as of R i ght ; Judgm ent of

t he C hancery C ourt A f f i rm ed i n P art , R ever s ed i n P art and R em anded A L AN E. H I GHERS , P .J ., W

. S. , del i ver ed the opi ni on of the C our t , i n w hi ch D AV I D R. F A R MER , J. , and J. S TEV EN S TAFF ORD , J

. , j oi ned. P h i l i p M

. Kl e i n s mi t h , Co l o r a d o S p r i n g s , Co l o r a d o , f o rt h e a p p e l l a n t , We l l s F a r g o Ba n k , N. A. G

. Pa tr i c k Ar noul t , M emphi s , T ennes s ee, fort he appe l l ees , J ohn Ski pperand B r enda Ski pper-2- OP I NI ON I. F ACTS & P ROCEDURAL H I ST ORY R o b e r t a n d P a m e l a B r a m l e t tb o r r o w e d $ 5 6 , 7 0 0

. 0 0 f r o m A r g e n tM o r t g a g e C o m p a n y, L L C ( “A r gent ”) , s ecur ed bya dee d of trus t , dat ed M ay2004, on t hei rr eal pr oper t yl ocat ed at850 N or t h Fr ay s er C i r cl e, M emphi s , T ennes s ee ( “the prope r t y ”)

. I n M ay2005, t he dee d o f t ru s twa s a s s i g n e d t o Am e r i q u e s tM o r t g a g e Co

. a n d t h e n t o We l l s Fa r g o Ba n k , NA, T rus t ee, for the B enef

i tof C er t i fi cat e H ol der s of A s s et
- B acke d Pas s - T hr ough C er t i fi cat es Ser i es 2004 W C W 1 ( “W el l s Far go”)

. I n N ovember of 2005, t he I nt ernal R evenue Ser vi ce ( “I R S”) fi l ed tw o t ax l i ens agai ns tt he B r aml et t s i n t he off i ce of t he Shel byC ount yR egi s t er o f D e e d s. O n F e b ru a ry1 , 2 0 0 6 , W e lls F a rg o a p p o in ted P h ili p M . K lein sm ith a s s u b stitu te tr u s te e , a n d o n M a rc h 2 3 , 2 0 0 6 , W e lls F a rg o p u rc h a s e d th e p ro p e rt yin a f o re c lo s u re s a le

. J ohn and B r enda Ski pper ( “A ppel l ees ”) pur chas ed t he pr oper t y fr om W el l s Far go, on J ul y7, 2006, for$20, 496. 64. T he “Corpor at e Speci al W arr antyD eed” pr es ent ed t o t he Ski pper s cont ai ned the fol l ow i ng l anguage : T he co n v ey ance i s m ade s ubj ectt o anySubdi vi s i on R es t r i ct i ons , B ui l di ng L i nes and Ease m ent s o f R ec or d i n Pl atB ook 12, Page 32, E as ement s of R ecor d atB ook 4020 Page 529, and t he 2006 Shel by C ount y and 2007 C i t yof M emphi s r eal pr oper t yt axes , not y et due and pay abl e, w hi ch ar e as s um ed by t he G r ant ee. T O H A V E A N D T O H O L D T h e a f o re sa id re a l es tate , tog e th e r w ith a ll t he ap pu rt enan ces and heredi t am ents t here un t o b el on ging or i n an yw i se appert ai ni ng unt o t he s ai d G r ant ee, hi s / her hei r s , s ucce s s or s and as s i gns i n fee sim p le fo rev er. T h e G ra n to r d o e s h e re b y c o v e n a n t w ith th e G ra n tee th a t th e G ra n to r is l aw full ysei zed in fee of t he af oredescri bed real est at e; t hat the G rant or has a good r i ghtt o s el l and convey t he s ame; t hat t he s ame i s unencumber ed exc ept as s etoutabove. A nd t he part i es of the fi r s tpar tdo her ebycovena ntw i t h t he par t i es of t he s econd pa r t t hat t he t i t l e and qui et pos s es s i on t her et o t heyw i l l w arr antand for everdefe nd agai ns tt he l aw ful cl ai m s of al l per s ons cl ai m i ng by , t hr ough, orundert hem, butnotfur t herorot herw i s e. T h e S k i p p e r s t h e n s p e n t$ 1 0 , 9 9 8

. 9 7 r e n o v a t i n g t h e p r o p e r t y i n a n t i c i p a t i o n o f a r e - s a l e . OnThe IRS tax liens w ere u ltim ately release d in Nov em

ber 2 007. 1 -3- D e c e m b e r 4 , 2 0 0 6 , the S k ip p e rs e n ter e d in to a re a l e sta te sa les c o n tra c t to se ll th e p ro p e rty to P h y ll is M cD an iel fo r $ 6 3 ,0 0 0

. 0 0 to b e c lose d o n o r be fo re Ja n u ary1 , 2 0 0 7

. H o w ev er, befor e the s al e cl os ed, t he exi s t ence of the tw o I R S l i ens t ot al ing $127, 643. 84 w as di s cover ed. 1
T he Ski pper s m ai nta i ned fi r e i ns ur ance on t he pr oper t yt hr ough February2007. H ow ever , aft ert he pol i cyl aps ed, t he pr oper t y w as ser i ous l ydamaged byfi r e on J une 24, 2 0 0 7 , a n d s u b s e q u e n tly d e m o lis h e d b yth e c ity o f M e m p h is

. T he Ski pper s fi l ed a c om pl ai ntagai ns tW el l s Far go on A u g u st 1 3 , 2007, al l egi ng, a m o n g o th e r th in g s, th a t W e lls F a rg o b re a c h e d its w a rra n tyo f g o o d tit le a n d th a t itf

a iled to compl yw i t h t he pr ovi s i ons of T ennes s ee C ode A nnot at ed sec t i on 35- 5- 104. O n D ece m ber 19, 2007, t he Ski pper s al s o fi l ed a c om pl ai ntagai ns tFi r s tA m er i can T it le I ns ur ance C o m p a n y (“ F irst A m e ric a n ” ), w h ich h a d iss u e d a tit le in su ra n c e p o licyin su rin g th e p ro p e rty against un m arket abil i t y , or an y defe ct , l i en, or en cum brance on t he t i t l e. T he sui t s agai nst F ir s t A m e ric a n a n d W e lls F a rg o w e re c o n so lid a ted a n d tried jo in tly . A f ter th e trial in th is m at t er, bu tpri or t o th e trial c ou rt ’s rul i ng , t he S kippers set t l ed thei r cl ai m w i t h F i rs t A m er i can f

or $13, 000. 00. T he t r i al cour t ent er ed an or der on M ay 21, 2009, aw ar di ng t he Ski pper s $21, 221. 12. T he tr i al cour t i s s ued l engthy fi ndi ngs of fac t , i ncl udi ng t he fol l ow i ng: T he W arr antyD eed c ont ai ned a w arr antyt hat[W el l s Far go] had a good r i ght t o s el l and convey t he sai d pr oper t yand thatt he pr oper t yw as unencumber ed exce ptfors ubdi vi s i on r es t r i ct i ons , bui l di ng l i nes and ea s ement s of r ecor d and pr oper t yt axes noty etdue and pa y abl e. T he dee d di d notm ake a nyexce pt i on for t w o u nrel eased IR S t ax li ens.

. . . . I t is undi s put ed thatt he M cD ani el contr actfai l ed t o cl os e bec aus e of the exis t ence o f t w o u nrel eased IR S t ax li ens fi l ed in the R egis t er’ s O ffi ce aga i nst th e p re v io u s o w n e rs o f

th e p ro p e rty , R o b e rt a n d P a m e la B ra m lett. P lai n tif f s av er (an d D ef

en d an t W ell s F arg o ad m it s) t h at t h ese tax liens w ere n o t d isc lo se d to th e m (S k ip p e rs) a t th e tim e o f th e ir p u rc h a se o f

th e p ro p e rty ori n t he N ot i ce of For ecl os ur e Sal e, or i n t he T rus t ee’ s D eed t o W el l s Far go o r t h e W a rr a n ty D e e d to th e S k ip p e rs . T he tr i al cou rtal so m ade co nclusi on s of l aw , i n rel evan tpart , as fol l ow s:-4-

“Fee s i m pl e” t i t l e di d pas s t o t he Ski pper s aft ert he [Succ es s or ] T rus t ee’ s D eed to W e lls F a rg o .

. . . . O n M ar ch 23, 2006 t he for ec losu r e s al e w as hel d and W el l s Far go w as t he su c c e ss f u l b id d e r. T h e re is n o in d ica tio n th a t an yo th e r p e rso n o r e n tity a p p e a r e d a tt h e f

o r e c l o s u r e s a l e a n d m a d e a n y o t h e rb i d o n s a i d p r o p e r t y.

. . . . A tt he t i m e W el l s Far go exec ut ed t he W arr antyD eed t o Pl ai nt i ffs , t her e i s no pr oof, of r ecor d, that i t knew about t he pr e- exi s t i ng I R S t ax l i ens t hathad bee n fi l ed aga i ns tt he B r aml et t s pr i ort o t he for ecl os ur e s al e.

. . . . A l t hough t he D efe ndantW el l s Far go comm i t t ed no fr aud orm i s r epr es ent at i on agai ns tt he Ski pper s , i tdi d w arr ant that ti tl e t o t he pr oper t y , as of J ul y21, 2007, w as “unenc um ber ed exce pt for s ubdi vi s i on r es t r i ct i on[s ] , bui l di ng l i nes a n d e a s e m e n ts o f

re c o rd a n d p ro p e rt yta x e s n o t yet d u e a n d p a y a b le .” Such a r epr es ent at i on i m pl i ed t hatt he t i t l e t o t he r eal pr oper t ybei ng pur chas ed by the Ski pper s w as “mar ket abl e”, and unenc um ber ed exc eptfort he above s peci fi ed l i m i t at i ons and r es t r i ct i ons , att he t i m e of thatcl os i ng. T he exi s t enc e o f t he tw o ( 2) unr el eas ed I R S t ax l i ens defe at ed the “m arket abil i t y ” of the S kippers t i t l e on January1, 20 0 7 and res ult ed in l ost pr ofi tt o t he Ski pper s as a r es ul tof the fa i l ed M cD ani el cl os i ng. H a d th e S k ip p e rs b e e n a b le to c lo se o n th e M c D a n iel c o n tra c t, th e yw o u ld hav e recei ved a gross profi t of approx i m at el y $2 4, 72 1. 12 (or$6 3, 00 0. 00 l ess $ 3 8 ,2 7 8 .8 8 ), les s w h a tev e r th e ir c lo sin g e x p e n se s w o u ld h a v e b e e n , fr o m th e ir r es al e of the i m pr oved r eal es t at e. W hen the M cD ani el contr actfel l t hr ough, t he Ski pper s w er e damaged att hat t i m e, w i t h l os tpr ofi t s , butt heys t i l l pos s es s ed and had ow ner s hi p of the s ubj ect r eal es t at e w i t h i m pr ovement s t her eon. F o r p u rp o se s o f c o m p u tin g d a m a g e s, it m a k e s n o d if f e re n c e to th is C o u rt a s to-5-

w h at insu ran ce the [S ]kip p ers did or did no t h av e on the pro p er ty th ere af ter, t heys t i l l ow ned the s ame. A ft erl earni ng of t he sett l ement w i t h Fi r s tA m er i can, W el l s Far go s oughta r educt i on of t he t r i al court ’ s j udgm entbyt he s et t l ement amount
. Sai d m ot i on w as deni ed. W el l s Far go app eal s.

II. I SSUES P RESENT ED W el l s Far go has t i m el y fi l ed i t s not i ce of appea l and pr es ent s t he fol l ow i ng i s s ues for r e v i e w: 1

. D id th e W e lls F a rg o S p e c ial W a rra n tyD e e d to th e S k ip p e rs c o n tain a w a rra n ty againstt he IR S l i ens; 2. W as t he W el l s Far go Speci al W arr anty D eed t o t he Ski pper s an “i m pl i ed w arr antyof m e rc h a n tab ili ty ” a g a in st th e IR S lien s; 3. D i d t he Ski pper s have a l egal dut y t o m i t i gat e thei rdamages byi ns ur i ng t he Fr ay s er Pr oper t yagai ns tfi r e; and 4. If W el l s F argo i s li able t o t he S kippers , shou l d thei r $13,000.00 set t l em ent fr om F i rs t A m e r i c a n b e a c r e d i ta g a i n s tt h a tl i a b i l i t y?

III . S T AN DA RD OF R EVIE W O n appea l , a tr i al cour t ’ s fac tual fi ndi ngs ar e pre s um ed t o be corr ect , and w e w i l l not o v e r tu r n t h o s e f

a c tu a l f i n d i ng s un l e s s t h e e v i d e n c e p r e p o n d e r a t e s a g a i n s tt h e m. Te n n . R. A p p . P . 1 3 (d ) (2 0 0 9 ); B ogan v. B ogan , 60 S. W

. 3d 721, 727 ( T enn. 2001)

. For t he evi dence t o pr eponder at e agai ns ta tr i al cour t ’ s fi ndi ng of fa ct , i tm us ts uppor tanotherfi ndi ng of fa ct w ith g re a te r c o n v in c in g e f f e c t. W at s on v. W at s on , 196 S. W

. 3d 69 5 , 7 0 1 (T enn. C t
. A pp. 2005) ( ci t i ng W

alkerv. Sidney G i l reath & A ssocs. , 4 0 S

. W

. 3 d 6 6 , 7 1 (T en n . C t. A p p . 2 0 0 0 ); The R eal t

y Shop, I nc. v. R R W

es tm i ns t erH

oldi ng, I nc. , 7 S. W

. 3d 581, 596 ( T enn. C t
. A pp. 1 9 9 9 )). W h e n th e trial co u rt m a k e s n o sp e c if ic f in d in g s o f f

a c t, w e re v iew th e re c o r d to d e te rm in e w h e re th e p re p o n d e ra n c e o f th e e v id e n c e lie s . G a n ze v o o rt v . R u ss e ll , 949 S. W

. 2d 293, 296 ( T enn. 1997) ( ci t i ng Kem p v. Thurm ond , 5 2 1 S

. W. 2 d 8 0 6 , 8 0 8 ( T e n n . 1 9 7 5 ) )

. We acc or d gr eat defe r ence t o a t r i al cour t ’ s det er m i nat i ons on m at t er s of w i t nes s cr edi bi l i t yand w i l l notr e- eval uat e s uch det er m i nat i ons abs entcl earand convi nci ng evi dence t o t he-6-

c o n t r a ry. W

e lls v . T e n n e ss e e B d

. o f R e g e n ts , 9 S. W

. 3 d 7 7 9 , 7 8 3 ( Te n n . 1 9 9 9 ) ( c i t a t i ons om i t t ed). W e r evi ew a tr i al cour t ’ s concl us i ons of l aw undera de novo s t andar d upon t he re c o rd w ith n o p re s u m p tio n o f c o rr e c tn e s s . U

ni on Car bide Cor

p. v. Huddles ton , 854 S. W

. 2d 87, 91 ( T enn. 1993) ( ci t i ng Es t at e of A dki ns v. W

hi t e C ons ol

. I

ndus

. , I nc. , 788 S .W .2 d 8 1 5 , 8 1 7 (T e n n . C t. A p p . 1 9 8 9 ))

. I V. D I SC US SI ON A. I RS T ax Li e ns W ell s F arg o claim s tha t i ts C o rpo rate S p ec ial W arran tyD ee d ( “D eed” ) t o th e S k ipp ers c o n tain s c o n f

lictin g lan g u a g e ; itw a rra n ts a g a in st a ll en c u m b ra n c e s e x c e p t th o se sp e c if ica lly m ent i oned above –s ubdi vi s i on r est r i ct i ons , bui l di ng l i ens and ea s ement s of r ecor d, and pr oper t yt axes –butt hen i t s t at es t hat i t w arr ant s onl y agai ns t encumbr ance s by , t hr ough, or underW el l s Far go. W ell s Far go m ai nt ai ns t hata “r eas onabl e i nt erpr et at i on” of the c o n f l i c t i n g l a n g u a g e r e s u l t s i n t h e f o l l o w i n g w a r r a n t y: W e lls F argo w arr ants t hat t i t l e i s “unen cum bered” ex cept for ( t he spec if ic s p e c i f i e d e x c e p t i o n s ) a n d “ wi l l wa r r a n ta n d d e f e n d a g a i n s tt h e l a wf

u l c l a i ms of a ll p ersons c l ai m i ng by , t hr ough orunderW el l s Far go, butnotfur t heror ot herw i s e. R athert han foc us i ng on t he D eed’ s l anguage , t he Ski pper s pr i m ar il y rely upon t he s t atut or yl anguage found i n T ennes s ee Code A nnot at ed s ect i on 35- 5- 101, ets eq. , cont endi ng t hati ti m pos ed an a ffi r m at i ve duty upon W el l s Far go t o di s cl os e the I R S l i ens . T ennes s ee C o d e A n n o tate d se c tio n 3 5 -5 -1 0 1 , et s e q . p ro v id e s in p a rt: I n a s al e of l an d to for ecl os e a de ed of trus t , m or t gage orot herl i en s ecur i ng t he pay me n to f

mon e yo ro t h e rt h i n g o f v a l u e o ru n d e rj u d i c i a l o r d e r s or p r o c e s s , a d v e r t i s e me n to f t h e s a l e s h a l l b e ma d e a tl e a s tt h r e e ( 3 ) d i f f e r ent t i m es i n s om e new s paper publ i s hed i n t he countyw her e the s al e i s t o be made.

. . . . (a ) T h e a d v e rtise m e n t o r n o tice sh a ll:

. . . . (4 ) ( A ) I d e n tifye a c h a n d e v e rylien o r c laim e d lien o f th e U n ited S tate s w ith26 U. S.C .A

. § 7425 (b) prov ides that the sale of prope rty on whic h theUnited States claim s a lien 2 shall b e made subject to su ch lien , if the lien w as tim ely recorded and the United States was witho ut no tice of thesale.

Tennessee Cod e Annotat e d s e c tion 3 5- 5- 106 refers to an “ officer” or “o ther p erson m akingthe 3 sa le [. ]” -7- r es pectt o w hi ch 26 U

. S. C

. § 7425( b) r equi r es not i ce t o be gi ven t o t he U ni t ed 2 St at es i n or der for t he s al e of t he l and t hus advert i s ed nott o be s ubj ectt o t he l i en o r cl ai m of li en o f t he U nit ed S t at es; ( B ) For everyl i en orcl ai m of l i en of t h e U n it ed St at es s o i dent i fi ed, aff i r m at i vel ys t at e thatt he not i ce r equi r ed by 26 U

. S. C

. § 7425( b) t o be gi ven to th e U n ited S tate s h a s b e e n tim e lyg iv e n ; ( C ) For every l i en or cl ai m of l i en of t he U ni t ed St at es s o i dent i fi ed, s t at e that t he s al e of the l and thus advert i s ed w i l l be s ubj ectt o t he r i ghtof th e U ni t ed S tat es to red ee m the lan d as p rov ided fo r i n 2 6 U

. S

. C

. § 7 4 2 5 (d)(1 );

. . . . ( 5) ( C ) ( b) T he dee d m emori al i zi ng t he s al e s hal l

. . . w heneve r s ubs ect i on ( a) has r equi r ed n o t i ce t o be gi ven t o t he U ni t ed St at es . . . s t at e thatt he l and d e sc rib e d th e re in is c o n v e y e d su b jec t to th e rig h ts o f th e U n ited S tate s to r edee m t he l and as pr ovi ded fori n 26 U

. S. C

. § 7425( d) (1)

. . . , sh al l have at t ache d t o i t , as exhi bi t s , a copyof the not i ce thus prov ide d t o t he U ni t ed St at es , a copyof t he w r i t t en r es pons e of the U ni t ed St at es to the n ot i ce thus p ro v id e d , if

a n y [ .]

. . . . Shoul d t he off

i cer , orot herper s on m aki ng the s al e, pr ocee d t o s el l w i t hout pur s ui ng t he pr ovi s i ons of t hi s chapt er , t he s al e s hal l noton that account , be ei t hervoi d orvoi dabl e. A n yo f f ice r, o r o th e r p e rso n , ref e re n c e d in § 3 5 -5 -1 0 6 w h o f a ils to c o m p ly 3 w ith th is c h a p ter c o m m its a C las s C m isd e m e a n o r a n d is, m o re o v e r, liab le to t he part yi nj ur ed byt he noncompl i ance , fo r al l damages r es ul t i ng fr om t he fai l ur e.The j udgm ent represents a $63, 000. 00 contract sales p rice less the S kippers’ $38, 278. 88 inv estm ent 4 and $3, 500. 00 closingcos ts. -8- T enn. C ode A nn. §§ 35- 5- 101, - 104, - 106, - 07

. A c c o rd in g to th e S k ip p e rs, w h e n W e lls Far go for ecl os ed on, and ul t i m at el ypur chas ed, t he pr oper t y , i tfai led to ad v ert i s e orgi ve n o tice re g a rd in g g o v e rn m e n tal l ie n s, a n d it fa iled to in c lu d e th e re q u ire d lan g u a g e w ith in W el l s Far go’ s Succes s orT rus t ee D eed. T he Ski pper s cl ai m t hat“the fa i l ur e of the Trus t ee t o i ncl ude such l i en i nfor m at i on i n t he for ecl os ur e deed const i tut ed a r epr es ent at i on on t he publ i c r ecor d i n t he R egi s t er ’ s O ffi ce of Shel byC ount y , T ennes s ee, t o be r el i ed upon by su b se q u e n t tit le e x a m in e rs th a t n o su c h IR S lien s e x iste d u n les s th e se a rc h re a c h e d b a c k in t i m e bey ond t he Trus t ee’ s deed t o W el l s Far go. ” T he t r i al cour t addr es s ed nei t hert he Ski pper s ’ ar gum entr egar di ng s t r i ctl i abi l i t yfor f a ilu r e to c o m p lyw ith th e re q u ire m e n ts o f th e f o re c lo su re sta tu tes , n o r th e a lleg e d ly c o n tra d icto rylan g u a g e in c lu d e d w ith in th e D e e d

. In ste a d , it f o c u se d o n th e D e e d ’s w a rra n ty t hatt he pr oper t yw as unencumber ed exc eptfort he s peci fi ed l i m i t at i ons and r es t r i ct i ons , and it fo u n d th a t su c h lan g u a g e im p lied th a t th e p ro p e rtyw a s “ m a rk e tab le.” It th e n h e ld W e lls Far go l i abl e fort he pr ofi tt he Ski pper s l os t w hen the di s coveryof the I R S t ax l i ens pr event ed th e p ro p e rt y ’s s a le

. W e agr ee w i t h t he Ski pper s ’ cont ent i on t hatW el l s Far go’ s fai l ur e t o advert i s e orgi ve not i ce r egar di ng t he t ax l i ens , and i t s fai l ur e t o i ncl ude l anguage w i t hi n t he D eed thats uch not i ce ha d been gi ven and t hat t he prope r t yw as convey ed s ubj ectt o t he t ax l i ens , vi ol at ed t he st atutor yrequi rem ents of T enn esse e C o de A nn otat ed sect i on 35 -5- 10 1, etseq. T hu s, pur s uant t o s ect i on 35- 5- 107, W el l s Far go i s l i abl e t o t he Ski pper s “foral l damages r es ul t i ng fr om t he fa i l ur e. ” T enn. C ode A nn. § 35- 5-107

. W e af fi r m t he tr i al cour t ’ s aw ar d of $21, 221. 12 forl os tpr ofi t s , and w e nee d notaddr es s t he D eed’ s al l egedl yconfl i ct i ng

4 la n g u a g e .
B . I nsur ance A ft erpur chas i ng t he pr oper t yi n J ul y2006, t he Ski pper s i ns ur ed i t ag ains t f i r e. D ur i ng t he mont hs of D ece m ber2006 and J anuary2007, t he pr oper t yw as br oken i n t o t hr ee ti m es. In F eb rua ry2 0 0 7 , su b seq u en t to learn ing o f the ex ist en ce o f the tax li en s, the S k ipp ers b o a rd e d u p th e p ro p e rtya n d c e a se d in s u r in g it. T h e u n in su re d p ro p e rtyw a s p a rtially d e s tr o y e d b yf

ir e in J u n e 2 0 0 7 , a n d s u b s e q u e n tly d e m o lis h e d

. W el ls F arg o cont ends t hatt he Ski pper s had a dutyt o m i t i gat e thei rdamages by i ns ur i ng t he pr oper t yagai ns t fi r e. W el l s Far go cl ai m s t hatt he pr oper t ycoul d have be en-9-

i ns ur ed fora nomi nal fee of $107 per m ont h, and t hat i f s o i ns ur ed, t he Ski pper s ’ damages coul d have be en r educe d orel i m i nat ed. A cc o rdi ng t o W el l s Far go, had the pr oper t ybeen i ns ur ed, upon i t s des t ruct i on t he Ski pper s coul d have r ecove r ed $ 4 0 , 0 0 0

. 00, r es t or ed the pr oper t y , and pot ent i al l yr es ol d itforan amount equal t o orgr eat ert han the M cD ani el pur chas e pr i ce, t hus el i m i nat i ng a j udgm entforl os tpr ofi t s . A l t ernat i vel y , W el l s Far go cl ai m s t hatt he Ski pper s coul d have s at i s fi ed orr educe d t hei rcl ai m agai ns t i tbypocket i ng t he i ns ur ance pr ocee ds and s el l i ng t he vac antl and. T h e tri al co u rtfo u n d that “[ w ]he n the M cD an iel co n tr ac t fell thro u g h , the S k ipp ers w er e damaged att hatt i m e” a nd t hat“[f ] or[the] purpos e of comput i ng damages , i t m akes no di ffe r ence t o t hi s C our tas t o w h at in su ran ce t he [S] ki pper s di d nordi d nothave on the pr oper t yt her eaf

t er , t heys t i l l ow ned the s ame. ” U nder t he fa ct s of thi s cas e, w e fi nd t hatt he Ski pper s had a dutyt o i ns ur e the pr oper t y . I n Turne r v. B ens on , 672 S. W

. 2d 752, 757 ( T enn. 1 9 8 4 ) , o u rS u p r e me Co u r ta l l o we d t h e p l a i n t i f f o wn e r s t o r e c o ve r i ns ur a n c e p r e mi u ms expende d w hen t he buy erdefe ndant s br eac hed the part i es ’ hom e s al e contr act
. A s di ct a, t he C our ts t at ed that“[h] ad the pl ai nt i ffs fai l ed t o i ns ur e the pr oper t yand a l os s r es ul t ed ther eof, t heycoul d eas i l yhave be en char geabl e w i t h fai l ur e t o carr ys uch i ns ur ance . ” Turner , 672 S. W

. 2d at757 ( ci t i ng Ke m p v . G a n n e tt , 50 I l l

. A pp. 3d 429, 8 I l l

. D ec. 726, 365 N

. E

. 2d 1112 (Il l. A p p . C t. 1 9 7 7 ); Fr ank v. Jans en , 3 0 3 M in n . 8 6 , 2 2 6 N .W .2 d 7 3 9 (M in n . 1 9 7 5 )); see al so Far m er v. R eed Ker as B ui ck Co. , 1986 W L 2304, at *4 ( T enn. C t
. A pp. W

. S. Feb. 20, 1986) r eh’ g deni ed (T e n n . M a r. 2 1 , 1 9 8 6 ) ( n o tin g th a t th e p lain tiff s’ h a d a c o n tra c tu a l d u tyto m ai nt ai n phy s i cal damage i ns ur ance , and t hat t hei rfai l ur e t o i ns ur e thei rpr oper t ycons t i tut ed a fa il ur e t o m i t i gat e thei rdamages )

. B eca us e the Ski pper s ’ damages coul d have be en re d u c e d o r ev e n e lim in a ted b y a n in su ra n c e p a y o u t, w e f in d th a t W e lls F a r g o ’ s li a b ili ty s houl d be r educe d t o r efl ectt he damage the Ski pper s w oul d have s uffe r ed, i f any , had they m ai nt ai ned i ns ur ance on t he pr oper t y , and w e r emand t o t he tr i al cour tfort hi s det er m i nat i on.

C . S e ttle m e n t Cre dit Fi nal l y , W el l s Far go ar gues t hatt he tr i al cour terr ed i n deny i ng i t s m ot i on t o r educe t he Ski pper s ’ aw ar d by t he am ount of t he F i r s t A m er i can Set t l ement
. W el l s Far go m ai nt ai ns th a t u n le s s th e a w a rd is re d u c e d , th e S k ip p e rs w il l r e c e i v e a “ w in d f a ll d o u b le re c o v e ry.” Ho we v e r , t h e S k i p p e r s c l a i m t h a t“ [ t ] hi s i s n o ta c a s e wh e r e t wo d e f e n d a n t s i n t h e s a me l aw s ui tar e j o intl y and s ever al l yl i abl e fordamages caus ed t o a pl ai nt i ff f orw hi ch one defe ndantw oul d be ent i t l ed under a t heory of contr i but i on or compar at i ve negl i gence t o be cr edi te d forw hat everthe otherdefe ndantm ayhave pa i d t o obt ai n a r el eas e fr om r i s k of a d d iti o n a l li a b ili tya t trial o n . . . o n e c o m m o n leg a l th e o ry [ .]” In ste a d , the S k ip p e rs m a in tain th a t a s e to f

f is in a p p ro p ria te b e c a u se th e se ttl e m e n t an d th e trial c o u rt a w a rd in v o lv e se p a ra te t heor i es of l i abi l i t y . A ccor di ng t o t he Ski pper s , t he onl ycomm on t heory of l i abi l i t yal l eged-10-

agai ns tbot h W el l s Far go and Fi r s t A m er i can w as t hat t he D eed fai l ed t o conveyt i t l e fr om W el l s Far go t o t he S ki pper s . T heycl ai m i ti s fort hi s t heory , w hi ch w as ul t i m at el yr es ol ved byt he tr i al cour ti n favorof W el l s Far go, t hatFi r s tA m er i can pa i d t he Ski pper s a $13, 000. 00 set t l em ent, w hereas, t he tr i al cou rt ’s $2 1, 00 0. 00 j ud gm ent w as for the S kipper’ s l ostprofi t s. A lth o u g h the d etail s o f th e se tt lem en t b etw ee n the S k ipp ers an d F ir st A m erican are notdi s cl os ed w i t hi n t he rec o rd befor e us , w e ar e, nonethel es s , abl e t o concl ude thatt he s et t l ement and the tr i al cour t j udgm ent ar e base d on di ffe r i ng t heor i es of l i abi l i t y . T he tr i al cour taw ar ded damages t o t he Ski pper s fort hei rl os tpr ofi t s r es ul t i ng fr om t he di s coveryof t he t ax l i ens –a countnotal l eged by t he S ki pper s agai ns t Fi r s t A m er i can. “I ti s a uni ver s al rul e th at th e p ri nci pl e of c ont r i but i on appl i es onl yi n s i tuat i ons w her e the equi t i es of t he par t i es ar e equal i n t hat t hey s har e a comm on obl i gat i on or l i abi l i t y . ” T R W -T itle I ns. Co. v. Stew ar t

T itle G uar. Co. , 832 S. W

. 2d 344, 346 ( T enn. C t
. A pp. 1991) ( ci t i ng C om m er ci al U ni on I ns . C o. v. Far m ers Mut

. F i r e I ns . C o. , 4 5 7 S

. W

. 2 d 2 2 4 , 2 2 7 (M o . C t. A p p . 1 9 7 0 )); s ee al s o H uggi ns v. G r aves , 337 F. 2d 486, 489 ( 6 C i r . 1964)

. T hus , beca us e t he t w o aw ar ds th w er e appa r ent l ybas ed on di ffe r ent t heor i es of l i abi l i t y , w e af fi r m t he tr i al cour t ’ s deni al of W e lls F a rg o ’s m o tio n f o r a re d u c tio n .

V. C ONC L US I ON

F o r th e a f

o re m e n tio n e d re a so n s, w e a f f irm in p a rt a n d re v e rse in p a rt. W e re m a n d to t he tr i al cour tfora det erm ination of the appr opr i at e j udgm entr educt i on bas ed on the S k ip p e r’s f

a ilu re to m iti g a te th e ir d a m a g e s. C o sts o f th is a p p e a l ar e tax e d e q u a llyto A p p ell an t, W ell s F arg o B an k , N A , an d it s su rety , an d A p p ell ee s, Jo h n an d B ren d a S k ipp er, f o rw h i c h e x e c u t i o n m a y i s s u e i f n e c e s s a r y.

A LA N E. H I G H ER S, P. J

. , W

. S.