1 

# FILED
Au gust 8, 1996 Cecil Crowson, Jr. App ellate C ou rt Clerk IN THE COURT

OF APPEA LS OF TEN NESSEE WESTER N SECTION AT J ACKSON

______________________________________________________________________________ BILLY GWIN MI TCHELL, Shel by Chancery No. 97623-2 R .D. C.A. No. 02A0

1-9503-CH-000

60 Plaintiff/Counter-Def

endant/Appellee, V. Hon. Rus sell Fowler, Special Chancel lo r
SAM F. CO LE, J R., S ubs titute Trust ee, ESTA TE OF PRU DENCE REYNOLDS , and GERALD W. PICKENS, Administrator CTA, Defendan ts/Co unter -Plaintiffs/App ellants. JAMES STE PHEN KING and ARTHUR E. QUINN, Bogatin, Lawson & Chiapella, Memphis, Attorneys fo r Plaintiff/Counter-D efendant/Appellee. SAMF. COLE, JR., Memphis, Att orney f or Defe ndant

s/Count er-Plaint iffs/ Ap pellants. REVERSED AND REMANDED Opinion filed:

______________________________________________________________________________ TOMLIN, Sr. J. The or ig ina l plaintiff

in this case, Billy Gwin Mitchell (“plaintiff” or “Mitchell”) filed sui t in the Chan cer y Cou rt of Shel by Co untyseeking to enjoin the foreclosure of a deed of trust

. Named as defendants were Sam F. Cole, Jr., Subst itute T rustee of the Estat

e of Prude nce Reynol ds, and Gera ld W. Picken s, Admin istrator CTA (“def endant s” or by name). Defendant s filed an answer

and a counter-complaint in which they contended, a mong other t hings, that

the rec ords of Mitchell’s Chapter

11 bankruptcy

case refl ect

ed Mi tchell ’s confirm ed amen ded pl an of reorganization man dat ed t ha t M it che ll pay t

he mort gage inde btedne ss to Ms. Reynolds

in accordan ce with the terms of the promissory not

e. As count

er-plaint

iffs, Co le an d Picken s sought a money judgment f or the principal balance due and owing on the note, plus acc rued interest and attorney’s fees and costs. At the concl usion of all the proof, the case was su bmitted to a jury, and after issues of fact had been resolved, the special chancell or entered a judgment in f avor of t

he Reynolds

estate in the amount o f $41,101. 64 on the pro missory note and at torney’s2

fees in the amount of $21,900 .00. Defe nda nts

filed a moti on for a new trial alleging five errors. The special chancel lor

denied the motion fo r a new trial and entered a fin al dec ree. This appeal fol lowe d.

Defe nda nts

have subm itted six issues to this cou rt f

or our consideration. Counter-plaintiffs

contend tha t the special chancell or erred: (1)in charging the jury that a pay m ent b y a t

hird part

y to a credit

or on b ehalf of t

he debt

or was a payment

towar d the de bt; (2)in allowing wit ness Don Kelly to test

ify as an expert witness when his

qu alificat

io ns a s su ch w

ere ne ve r e st

ab lish ed a t t

ria l; (3) in allowing plaintiff to i ntro duce an aut

omobile insura nce policy of a family partnership to be considered as eviden ce of pa yment o r credit towar ds the mo rtga ge indebt edn ess ; (4) in allowing witness Mary Mitchell to t estify as t

o alleged payments and othe r cre dits on the mort

gage debt made by nonpart ies; (5)in allowing pl aintiff t o test ify in violation o f the court ’s order in limine; (6) in failing to gr ant defendants a new tr ia l. We are of the opinion t hat t he specialchancellor did err, and that a new trial is mandat

ed by t his recor

d.
In 1973, following the death o f her brother, Ham Mitchell, a prominent land
owner in Mill ington, Prudence Rey no ld s (“d ece den t”) sol d he r 142 acr e farm to plaintiff, her nephew. In conjunction with t he sale, plaintiff executed a promissory note in the principal amount of $134,140.7 1, payable to decedent . The note was secured by a first deed of trust on the prop erty. The n ote ca ll ed f or pa yme nt to decedent

in monthly installments of $1,040.00 for a period of 20 (

twent y) ye ars, along with interest

at t he rate of seven (7%) p ercent per yea r. The deed of t rust was dul y recorded in the Register’s Offi ce in Shel by County. Following the d eath of his f at her , p lai nt if f a nd h is t

wo s ist ers , a llbeneficiaries of their fat

her’s estate, formed a partnership ent i tled “BAM Partnership.” Subseque ntly, due to the pa rtner s’ d iffi cul ty in p ayin g inh eri tance ta xes on th eir3

father’s estate, both plaintiff and the pa rtnership filed for bankruptcy under Chapter

11 of t he Bankruptcy Co de in the United Sta tes Bankrupt cy Court fo r the Western District of Tennessee in Memph is.
Plaintiff filed an amended pl an of reorganizat ion in his Chapter 11 case in 1984. With re spe ct to the paym ent of th e de bt to decedent, t he amended plan made the following provision:
The secured claim of Mrs. J .P. Reyno lds ( “Re yn olds

”)sha ll be fu lly sett led, satisfied, and discharged by paying to Reynolds the remaining sums due in ac cordance with the t erms of her Promissory Note and Deed of Tru st; except t hat, t he terms of said Note shall be extended by a period equal to the numbe r of mont hs tha t said Note is in arr ears. The first inst

allm ent sha ll be d ue a nd p ayab le upon conf irm ation with a similar payment

being due and payable each month thereaf ter until said Note shall have been paid in full. Reynolds shal l retain he r lien upo n t he D ebt or’ s 14 4 ac re f arm. (empha sis added)
Sho rt lythereafter, the bankruptcy court entered an or d er confirming plaintiff’s amended plan of reorganizatio n. During the period from April 1985 t o March 1988, plaintiff wrote 16 checks t

otaling $26,5 48.57 to decedent in payment of this not e. In addition, plaintiff sold 8.97 acres of t he farm during this

time, from which he paid decedent

$804. 68 of t

he proce eds.
In January 1988 plaintif f filed an interim report in his Chapter 11 case. In the section entitled “Total Amount of Claims Al lowed,” plaintiff’s report reflected t hat the principal amount of the debt owed to decedent at that time was $102,902. 28. This amo unt was l isted as payme nt number 92 of a total of 240 on the mor tgag e loan amortization sched ule. In his final report filed in November 1988, plaintiff set forth the same amount as t he amount of t

he debt at t hat t ime. In January 1989, the bankruptcy court

entered a final order closing plaintiff’s Chapt er 11 case.
Prudence Reynolds died in Ju ne 19 88 . A lth ou gh na med execu to r o n h er will, plaintiff decli ned to ser

ve. Ger ald W. Picke ns wa s ap poi nt ed e xec ut

or. Some ti me later, plaintiff and Pickens met t o discuss plaintiffs’ obligations under the note. After4

the parties were unable to agree upo n the amount o wed , Col e, as

sub stitute trustee under the deed of tr ust, wrote plaintiff advising him that the e ntire balance of the principal and interest on the no te was then due and payable. As of that time, the calculated principal and accrued interest o n the not e was $113,832.70, plus attorne y’s f

ees in the amo unt of

$17,074.80. Pl ain ti ff was a dvised that if the above amount was not paid by August 1, 1989, Cole would begin foreclosure.
On August 24, 19

89, plaintiff filed a petition for a temporary rest

raining order and for a temporary

and perm anent injunction see king to prohibit defend ants from proceeding with the fo reclosure
. Plaintiff contended t hat as a result of a n oral agreement

he had made with decedent, the val ue of goods and services rendered to decedent by the BAM part

nership, as well as cash payments made by the partn ers

hip to the d ece den t, wer e to be cre dite d ag ain st th e note . In that regard, plaintiff alleged that decedent had credited him with over 160 paym ents
on the n ote p rior t

o her dea th, which reduced t he balance due to $66, 330.18, and that he was entitled to have the correct balan ce of the not e ascertained before
a foreclosure sale coul d proceed. Shortly therea fter, a consent order on th e temporary

injun cti on was entered, enjoining defendant s from foreclosing. Defe nda nts the n fil ed a n ans wer as wel l a s a c oun ter-c omp la int.
In the cou nter- com pl ain t, def end ants alleged that

plaintif f owed a ba lance
on the n ote of $102,092.2 8, the st ated principal loan balance that appeared in plaintiff’s

bankruptcy pro ceeding in both his in t er im r ep or t an d t he fi na l re po rt

. In plaintiff’s

answer t

o the co unter

-complaint, he alleged that the amount of the balance due on the not e was not as st

ated above, but tha t the amount due as alleged by defendants in t heir counter-complaint was included in e rr or in his bankruptcy procee dings.
Prior totr ia l, the t rial court

granted defendants’ motion in limine prohibiting plaintiff from pres

entin g anyevid enc e at tr ia l con cernin g anyoral statem ents1 This case was upo n the docket of fo ur differen t chancellors by the time it came up for trial. It was originally assigned to t he Honora b le Georg e T. Lewis, Ch ancellor of Pa rt II, who recuse d himself because of his acquain t

ance with plaintiff. Cha ncell or Joe C. Morris, of Jackson, was thereaft er designated as Special Chancellor. After the Ho norabl e Floyd Pee te was

dul y el ecte d Ch anc el lo r of P art I I, the ca se was tra nsf err ed to him as the pre sidi ng c han cellor . While obv iou sly h and led pr ope rly, at

some point prior to tr ia l, C ha nce llor

Pe et e r ecu sed hi mse lf a nd S pe cia l Ch an cell o r Rus sellFowler was desig nated to trythe case. When, how, and by w hom Special Chancellor Fo wler was designat ed is unkno wn as t

here i s no order in the record. 5 made by de ced ent prior to her dea th in re gard to the no te and dee d of tr ust. 1 In addition, prior to tri al the chancellor ordered that of t he proposed factual issues presented by each party to be ultimately submitt ed to t he jury , the chan cell or ordered that

plaintif f’s issue o f fact

number 8 a nd defendan ts’ is sues of f

act numbers

5, 7 and 8 be subm itted at trial to the jury.
At trial, plaintiff

testif ied that he and t

he decedent

, his aun t, h ad a very

close relationship and that

her motivat

ion in selling him the farm was to prov ide her

with
a continuous stream of income for the rest of

her life. Although the court ’s order in limine prohibited plaintiff from testifying as to any or al stat ements made by his aunt concerning the n ote a nd trus t de ed p rior to her deat h, over the repeated objections of defendants’ counsel, plaintiff was allowed to t

estify concerning t

he various goods and se rvices that the BAM part

nership provided the decedent during her lifetime. Again over t he same objections, plaintiff was perm itted to testif

y that his book kee per

kept r ecords no t only o f cash pa yments made to decedent , but also would make notations on t he amortizat

ion schedule of the note of the cash value of the good s an d se rvic es p rovi ded to decedent from time to time through the BAM Partnership
. Following the over

r uled objections by defendants’ counsel, plaintiff was permitted to testify t

hat he provided wages and l odging for the g rounds

keeper of decedent

at a cost

of $250.00 p er week fo r some eigh t ye ars, t ota ling almost $40,00 0.00. Pl ain tiff a ls

o testi fied that thro ugh BAM he pr ovid ed d ece den t with6

automobiles

over the yea rs as well as providing her with insurance t hrough BAM’s fleet insu rance pol icy. Again, over objectio ns of counsel for defendants, cert ain BAM employees
were permitted t

o test ify in a manner suppo rtive of plaintiff’s earlie r testimony. Do na ld Kelly, a carpenter and maintenance man employed by BAM, testified t hat beginning in the 1960's, he m ade wee kl y visits to p la inti ff’s h ome to mak e both minor and major repairs, ranging from installing light bulbs to repairing the roo f. He
was also permit

ted by the ch ancellor, ove r the object ions of defendant

s’ co uns el, to testif yas an expert and give an opinion as tothe value of the goods and services he supplied in this e nde avor, wi thout a ful l e xam ina tion o f his qual ific ation s to testif y as an exp ert wit

ness.
Iwona Long, plaintiff’s fo rm er p ersonal secretary, and Mary Mitchell, who served as bookkeeper for plaintiff, t

he BAM partnership, Ham Mitchell, and the Ham Mit che llestate, both t

estified as to various amoun ts of cash payments an d goods and services supplied to decedent and th e no ta tions th ey ma de o f sa me on the loan amortization schedule. Mary Mitchell testified that at t he end of each year, at plaintiff’s request, she would give him a l ist of all the goods and services he had provided Mrs. Reynolds that year.
Defe ndant

Pickens was the sole witness who test ified on behalf o f defendant

s. He stat

ed that a t the time of t ria l, based upon the amount of in deb te dness

listed by plaintiff in his final report in bankruptcy, plaint iff owed $102,790. 23

as the balance of the pr inc ip al du e o n t

he no te , withac cru ed s imp le interest t

otaling $44,887.54, for a t otal of $147, 677.77.
At the conclusion of all the proof, the chancel lor instructed t

he jury as to t

he law that they should consider and other aspect s of their deliberations. Incl uded therein were three spe cial i nstructions, the first two of which were submitted at t he request of t

he defendants and agreed toby plaintiff, and t he third was a special7

request made by plaintiff, modified in part and accepted by t

he chancellor. They were as fo llows:

Ladies and gentlem en of the jury, I further instruct you that the term 

### < r es judicata’ . . . is defin ed in the la w as a matter adjud ged; a thing judiciall y acted upon or decid ed; a thing or matt er settled by judgme nt. Ladies and gentl e men of the jury, I further instruct t hat t he confirma tion of a plan of reorga nizat

ion by a Unit

ed Sta tes B

ankrupt cy Court has t he effec t of

a judgment

of a U nited S

tat es Dist ric t Cour

t, and res judicata principles bar relitigatio n of any issues raised or t hat could have be en raised i n the confirmat ion pro ceedings. Ladies and gentlemen of the jury, a payment by a thir d pa rty to a creditor on behal f of the debtor is payment towards the debt. I. The Jury Charge Wh ile ou r L

at in st udies t ea ch u s t

ha t “ allGaul is d ivid ed i nto three part s,” the specialjuryinstructions given by the ch ancel lor above at the request o f the part ies sho uld be divided into t wo parts. The t

wo special jury instructions given b y th e specialchancellor at the behest of the defendants in essence told the jury that the confirma tion of a plan of reorganizatio n in a U.S. Bankrupt cy Court

had th e sa me effect as a judgment of a U. S. District Court, and t

hat res judicata would bar relitigation of any issues that wer e p res ent ed o r co uld have been presented in t he bankrup tcy

confirmation proceedings. T he court explained to t he jurywhat

“res judicata” mea ns— i. e. , a th ing or mat te r se tt le d byjudgment. As we have indicated earlie r, t

hese t wo instructions were appro ved by counselfor bo th pa rties
.

Thereafter, in virtuall y the same breath, the chanc ell or told the jury th at “a payment

bya third party to a creditor on behalf of the de btor

is payment

towar ds the debt.” In simple language, this i nstr ucti on sa id to the jury t hat any payment by the BAM partnershi p to the decedent on behal f of pl aint iff Mit chell constit

uted a payment

towards Mitche ll ’s debt to deceden t. It is this instruction abo ut wh ich defendant

s stro ngly complain and which was given over their object ions.8 The effect of t

he conf irmation o f a plan of reorganizat ion in a Chapter

11 Bankrup tcy

case is stated in 1 1 U.S.C.A. § 1141 (1993) , which reads in pertinent part as follows: (a)Except as provided in subsections (d) (2) and (d)(3) of t his section, the provisions of a con firmed plan bin d the debtor . . . and a ny creditor
. . . [of] the debt

or, whether or not

the claim or int

erest of such creditor
. . . is impaired under t he plan and whet

her or no t such creditor . . . has accepted the p lan.
The fed eral cou rts ha ve c ons iste ntl y uphel d the finality of a confirmation of a bankr uptcy. E.g., In re Chat tano oga Wholesale Ant iques, Inc. , 930 F.2d 45 8, 463 (6t h Cir. 1 991). The Sixt

h Circuit stat ed as follows:
Section 1141 is

entitled “Effe ct of

confirmation.” Sect

ion 1141(

a) li sts categ ories o f parties who are bound by the t erms of confirmed plan. The effect of

confirmation under

the plan language of § 1141( a) is to bind all parties to t he terms of a plan of reorganization.

. . . Confirmation o f a plan of reo rganizatio n by t he bankr

uptcy court has

the effect

of a judgment by t he district court

and res jud ica ta principl es bar rel itigation of any issues ra ise d o r t ha t c ou ld have been rais

ed in the confirm ation proceeding s.

Id. (citations omitted).

Plaintiff’s

interim and final reports in bankrupt cy stat ed, under oath, in p ar t that the principal amount of t he indebtedness to Prudence Reynolds was $102,902. 28. Plaintiff’s amended plan of reorganizat

ion further st

ated that

this debt to decedent

was to be “fully set

tled, satisfied and discharged in acc ord anc e wi th her Prom iss ory N ote and Deed of Trus t.” Plaintiff’s am ended pl an of reorganization
was confirme d on June 13, 1984, by the Ho norable William B. Leffler, Chief U .S. Bankrup tcy

Judge. Any credits t hat plaintiff

contended that

he was ent

itled t o up to the filing of his amended plan of reorganizat ion should have been and coul d have be en pr

es en t ed t o t he ba nkru pt

cy co ur t fo r c on side ra tio n. It

is apparent from the lack of any

evidence in this

case of plaintiff cont esting the amount owed that9

he compl etely and totall y failed to do so.

Plaintiff contended in the t

rialcourt and cont

ends in this court in his brief and oralargument that

the balance of the loan as stated in his interim report and final report in his Chapter 11 case was a “ mistake,” arising from a mi sun der stand ing with his att orneys in the bankrup tcy ca se. As a result of this “ mistake ,” plaint

iff con tends that he is not bound under t

he statut

ory and case law that we have cit ed herein to this amount. This content ion is without merit

. An argument by t

he deb tor qu ite similar to t his argument of plaintiff was reject ed in In re Dooley , 1 16 B. R. 573, 578 (Bankr. S.D. Ohio 1990 ). In Dooley , the debtor chall enged the amou nt allow ed of
a secured creditor’ s claim on th e ground t h at t he creditor did not p roperly give credit to t he debtor’s obligatio n to him on various preconfirmatio n payments. The court therein noted that debtor had the opportunity to chall enge the amount of the allowed at t

wo different confirmatio n hearings, and that the debto r submitted his amended his

plan of reorganizat

ion over the credit

or’s objection. In rejecting this conte ntion , the b ankruptc y jud ge s tated i n par

t:

The lengthy and often vigorously contested process le adi ng to the confirm ation of

a d eb to r’ s p ro po sed Ch ap te r 1 1 Plan wou ld bec ome meaningless if the order

confirmi ng a debtor’s pl an was not accorded preclusive effect. For t hat reason, among others, a specific provision was

enac ted i n Cha pter 1 1 to s tatut orily strengthen t

he preclusive effect granted t o a Chapter 11 confirmation order.

. . . It is impossi ble to ignore the inclusion of the words “The provisions

of a confirmed plan bind the debtor” in applyin g this section. One Bankr

uptcy Court

noted, “It is t

he opinion of t

his court that § 1141 of

the B ankrupt cyCo de m ea ns wha t it s ays a nd n ot

on ly a re the creditors b ound by the confirmed plan, but t he debtors are also so bou nd.” (

citat ions omit

ted)

Id. at 578-79.

To give even more finality t o this conclusion, we cite Mill er v. Mein hardCommercial Cor

p. , 462 F.2d 35

8, 360 (5th Cir. 1 972), wherein t hat court

stated in10

part:

An arrangement confirmed by a bankrupt cy cou rt has t

he effect of a judgment rendered by a district court, and any attempt be the parties or t

hose in privity wit

h them to relitigate any o f the matt ers that were raised or could have been raised therein is barred under the doctrine res judicata.

. . . The suit

is no more than a collateral att ac k upon the referee’s

order confirming the plan of arrangement; t he integrit

y of the judgment

is challenged. Even though anaction has an independent purpose and contemplates some other re li ef, i t is a collater al att ack if it m ust i n som e fashion overrul e a pr evio us j udg me nt.

. . . Res judic ata applies where the subject matt er is the same, “not only to every

matt er which was offered and received to sust ain or def eat th e cla im o r de man d, bu t a lso as toan y o th er adm iss ib le matter which might have been offered for t hat purpose.”

Id. at 360 (citat

ions omitted).

We therefore conclude that the special chancellor erred when he gave plaintiff’s

sp ecial r

equest as modified, thereby permitting t

he jury to consider plaintiff’s

cre dits agai nst the note h el d by th e de ced ent that were clea rly precluded by t

he bankr

uptcy proceedi ngs.
It now bec ome s ne ces

sar y to decide whether this erroneous charge, more pr ob ab lythen not

, affected t

he judgment of the jury. T.R.A. P. 36(b)provides that “A final judgm ent . . . sha ll not be set aside unless, considerin g the whole record,
error . . . more probably t han not aff

ecte d th e judgment.“ In reviewing the
erroneo us

charge, it is app ropriate t o consider the charge as a who le in determining whether a prejud icial error has been commi tted. The spe cific instruction at is

sue must

be c ons

ide red in l igh t of its

context. Gorman v. Earhart , 876 S.W.2d 832, 836 (Tenn. 1994). Viewing the r

ecord as a whole, th e errone ous cha rge th at th e j ury co uld consider

payments made by a t hird party, B

AM, to t

he creditor, deceden t, on11

be ha lf of t he de bt or , p lai nt if f Mi tc hell, in sa tisf

act io n o f t he deb t, mor

e p ro ba bly than not affect

ed the verdict. One of the decisive issues before t he jury was the amount that Mitchell owed his aunt at t he time the suit

was brought. A substantial portion of plaintiff’s p roof focused on the various and su ndry typ es of credits that
were reportedly given, or should have been given, against his not e to decedent in the form of services rendered the decedent by the BAM part

nership and persons employed by the part nership, as well as

othe r goods

allegedl y provided decedent byplaintiff as a member of the BAMpa rt ner shi p. Allof this t

estimony was objected to and was subject to t he defense o f res judicata as a result of the plaintiff’s confirmed amended pl an of reorganizat ion.
It is apparent t

o this court

, from the record, t

hat t he jury took

into account

the plaintif f’s test imony concerning the value of goods and services prov ided to the decedent

by the BAMpartnership. While the bankruptcy pro ceedings established that the princ ipal amount plaintiff owed the not e as of November 1988 was $102,902. 28, the jury det ermined that t

he balance due on th e note t o decedent
was onl y $41, 101.64. Tak ing al l th is i nto ac cou nt, the tr ia l co urt ’s c ha rg e mo re likely than not

influenced the jury in determining the b alance due on the note in quest ion. T he judgment

of t he tr ial court ther efore must

be rever

sed.
As for the remaining evident iary issues of defendants, we find t hat each and everyone of them constituted error on behalf

of the trial court. In light of the legal eff ect of r es judicat

a of t he bankr

uptcy court ’s orders and judgment s, th e evidence plaintiff sought to introduce concerning the valu e of goods and services

provided bythe BA M partnership was irrelevant, immaterial, and inadmissable. T.R.E. 402
. Upon remand, t

he sco pe of the hearing sh ould be lim ited to the task of ascertaining the amount act ually due and owing by pl ai nti ff on the secured promissorynote , plus accrued inter est and att orney’s fees. Taking as a beginning point the out standing balance on the pro missory note as stated inthe b ankrupt cy12

court’s final ord er of

November 1988, t

he trial court

shoul d ascertain the am ount of payment

s, if any, made by pl aintiff from the time of the final order

of ban krupt

cy until the date o f trial, plus all accrued interest t o date.

Accordin gly, the decree of t he trial court is reversed and this cause is remanded to the Ch anc ery C ourt o f She lb y Cou ntyfor furt her proceed ings not inconsistent

with this opinio n. Costs in t his cause on appe al are taxed to plaintif f, for which e xecution may is sue if nece ssary.

________________________________________ TOMLIN, Sr. J.

________________________________________ LILLARD, J. (CONC URS)
HIGHERS, J., Not part

icipating