Court Opinion

ID: 1081328
Source: CourtListenerOpinion
Date Created: 2013-10-09 20:48:10.969245+00
Date Added: 2024-06-11T15:45:19.861939
License: Public Domain

CITY BANK & TRUST COMPANY and            )
B. TIMOTHY PIRTLE, Trustee,              )
                                         )
      Plaintiffs/Appellees,              )    Appeal No.
                                         )    01-A-01-9605-CH-00198
v.                                       )
                                         )    Warren Chancery
DAVE ALLEN WEBB and                      )    No. 5991
DEBBIE LYNN WEBB,                        )

      Defendants/Appellants.
                                         )
                                         )                       FILED
                                                                  February 5, 1997
                       COURT OF APPEALS OF TENNESSEE             Cecil W. Crowson
                                                                Appellate Court Clerk
                        MIDDLE SECTION AT NASHVILLE

     APPEAL FROM THE CHANCERY COURT FOR WARREN COUNTY

                          AT McMINNVILLE, TENNESSEE

            THE HONORABLE JOHN W. ROLLINS, CHANCELLOR

TIMOTHY L. REED
Suite 302, City Bank Building
McMinnville, Tennessee 37110
       ATTORNEY FOR PLAINTIFFS/APPELLEES

KEITH S. SMARTT
107 College Street
P. O. Box 869-B
McMinnville, Tennessee 37110
       ATTORNEY FOR DEFENDANTS/APPELLANTS

                               AFFIRMED AND REMANDED

                                                  SAMUEL L. LEWIS, JUDGE
                                   OPINION
         This is an appeal by defendants Dave Allen Webb and wife Debbie Lynn
Webb, from the trial court's judgment setting aside a foreclosure sale and, in effect,
putting the parties in the same position they were in before the foreclosure.

         We find that the facts, as found by the trial court, are supported by a
preponderance of the evidence and they are as follows:
                Defendants were in default on a promissory note payable
         to Plaintiff bank, secured by a deed of trust describing three
         parcels of real estate. When negotiation failed, and foreclosure
         was imminent, B. Timothy Pirtle, Trustee named in the Deed of
         Trust and attorney for [Plaintiff] Bank, agreed to the request of
         Defendants' then attorney to foreclose on the parcels sequentially.
         The parcels were Lot 13 and Lot 12 of McClaren Subdivision,
         plus a parcel owned by the mother of Dave Allen Webb. Lots 13
         and 12 were adjacent, but had been acquired by different deeds at
         different times. It was agreed that the house tract would be sold
         first under the foreclosure, in the hope that it would not be
         necessary to foreclose the vacant lot or the mother's parcel.
                To distinguish between the vacant lot and the lot upon
         which the house was located, Mr. Pirtle examined the tax map and
         data in the property tax appraiser's office. This clearly showed
         that the house was on Lot 12. In fact, however, the house was
         entirely on Lot 13.
                Mr. Pirtle, as Trustee, advertised and sold at auction Lot 12
         under the erroneous assumption that it was the house tract.
         Plaintiff bank bid and bought the property for $80,000.00, and
         credited that amount against the promissory note, erroneously
         believing it had bought the house.
                On the date of foreclosure, December 8, 1993, the
         indebtedness was $156,475.42 before credit for the foreclosure.
                Plaintiff bank sold the "house" (actually vacant Lot 12) to
         Mr. and Mrs. Riks for $97,500.00. Mr. and Mrs. Riks improved
         the house, and it has increased in value since the foreclosure.
         After lear[n]ing of the title problem, Plaintiff bank repurchased
         Lot 12 from Mr. and Mrs. Riks for $125,000.00.
                Meanwhile, Lot 13, with the house on it, has remained
         unforeclosed because Defendants filed a Chapter 13 bankruptcy
         in order to stay the foreclosure. However, the bankruptcy court
         has deferred to the judgment of this court on the issues involved
         in this action.
                THE COURT: I'm convinced that the Complaint as
         originally drafted, the relief that was sought would have been
         inappropriate. I really think it would have been because it's
         asking the Court to substitute a foreclosure on a lot that was not

                                         -2-
         actually sold, foreclosure at an arm's length transaction, and that's
         just fraught with all kinds of difficulties, but would have worked
         in my opinion to the potential detriment of the Webbs through no
         fault of their own, that they would not have been afforded the
         opportunity of having someone there, the highest, best bidder.
         Mr. Webb admitted he owes this money. Mr. Webb says he wants
         to pay it back. He even filed a Chapter 13. I don't think the relief
         as originally as requested is appropriate, however, I think Mr.
         Camp hit it right square on the head to put these parties back
         where they were before this initial foreclosure. It seems to me
         that is, as he said, equity regards done, what ought to be done, and
         that's clearly what ought to be done in this situation as far as I'm
         concerned as a Judge. I think we need to go right back to it, put
         them back in the same position they were before. . . . [T]he
         defendant's own expert has said this property has actually
         appreciated in value by some $20,000.00 or $30,000.00, which
         potentially could inure to the Webbs--I don't know that it will. I
         have no idea what [effect] this decision is going to have on what
         the Bankruptcy Court does or doesn't do, but I think the
         foreclosure is appropriate on both of the lots. I think the clerk
         and Master ought to be supervisor of the sale, although [he may]
         authorize[] or employ an auctioneer of his choosing to conduct
         the auction if the Clerk and Master feels it appropriate. I feel like
         the proceeds ought to be applied first to the indebtedness over at
         City Bank and Trust Company, and then any overage should go
         to the Webbs. I think it's only fair that the debt that the Webbs
         owe City Bank and Trust Company be set at the amount that was
         owed at the time of the very first foreclosure back in whenever
         that was. The clock of debt should not run against them from the
         point forward. It's not their fault. It was nothing they did or
         didn't do, but whatever that dollar figure is, that is what the
         indebtedness that . . . I find the Webbs owe City Bank and Trust
         Company. I'm talking way back in December of whenever that
         was. I don't know what the date was right off the top of my head.
         Whenever the foreclosure was initiated as of that day, whenever
         the first foreclosure notice was forwarded to the Webbs. That's
         what they owe in my opinion. I think December 8th is the
         appropriate date.

         The defendants present one issue: "Whether the trial court err[ed] in setting
aside the foreclosure sale at the request of the trustee and the mortgagee under the
deed of trust and ordering a new foreclosure sale?"

         The defendants assert that the plaintiff Bank, as a purchaser at a foreclosure
sale, should not be allowed to escape the consequences of its own negligence. In so

                                          -3-
doing, the defendants point out that there is no evidence that they contributed to the
mistake by providing erroneous information to the state tax appraiser. However, we
do not believe that it makes any difference whether they did or did not provide
erroneous information. This is not determinative of the issues in this instance.

          In Alston v. Porter, 219 S.W.2d 745 (Tenn. App. 1949), a suit was brought
for cancellation or reformation of a deed which was prepared in error without any
fault of the grantor or grantee. This court has held that the evidence clearly
established that the description in the deed was such as to include two tracts of land,
whereas the understanding of the parties was for the purchase of one tract and that the
erroneous description was due to an inadvertent mistake of the grantors' attorney. In
upholding the trial court's decree to correct the inaccurate deed, the court cited Hicks
v. Gooch, 3 Tenn. (Shannon) 447, 451 (Tenn. 1875):
                 "It is stated to be the well-defined and well-
                 established rule upon this subject, that when the
                 mistake is of so fundamental a character that the
                 minds of the parties have never, in fact, met; or
                 where an unconscionable advantage has been gained
                 by mistake or misapprehension, and there was no
                 gross negligence on the part of plaintiff, either in
                 falling into the error, or in not sooner claiming
                 redress, and no intervening rights have accrued, and
                 the parties may still be placed in statu quo, equity
                 will interpose in its discretion to prevent intolerable
                 injustice."

Alston, 219 S.W.2d at 746; see also Rentenbach Eng'g Co., Constr. Div. v. General
Realty Ltd., 707 S.W.2d 524, 527 (Tenn. App. 1985).

          Quoting from 19 Am. Jur. Relief--Mistakes of Fact § 53, the Alston Court
further stated that, "[a] court of chancery has jurisdiction to relieve parties from the
consequences of a mistake of fact . . . . [T]o permit the just rights of a party to be lost
[because of a mistake], when relief would not be prejudicial to the rights of others,
would be manifestly unrighteous and inequitable." Id. at 31; see Martin v. Martin,
755 S.W.2d 793, 797 (Tenn. App. 1988) (maintaining chancery court's inherent
jurisdiction to correct mistakes). In order to be subject to correction, a mistake which
is not induced by fraud must have been mutual. Kozy v. Werle, 902 S.W.2d 404, 411
(Tenn. App. 1995). Reformation will be decreed only where the evidence is clear and

                                            -4-
conclusive as to the parties intentions. Pierce v. Flynn, 656 S.W.2d 42, 46 (Tenn.
App. 1983).

          While the trial court's decision does not provide the defendants with the
windfall that they desire, the record does not reflect that the defendants will be
prejudiced by the setting aside of the foreclosure sale. Indeed, the undisputed
evidence at trial from the testimony of defendants' own realtor was that the fair
market value of the realty had significantly increased since the time of the original
sale. Furthermore, it would be manifestly unjust and inequitable to permit the
defendants to gain a windfall when the circumstances giving rise to the error arose
out of a plan for the sequential sale of different properties - - a method which was
devised for the sole purpose of preserving for them any real estate that might not be
necessary to pay the outstanding indebtedness to the bank.

          The trial court rendered equity in rescinding the foreclosure proceedings
and in restoring the parties to their respective positions prior to the original sale. To
the extent that the defendants' liability on the indebtedness owed to the bank had
already been discharged in bankruptcy, defendants stand only to gain by another sale
of both lots. We are therefore of opinion that the judgment of the trial court should
in all things be affirmed, and the cause remanded to the trial court for further
necessary proceedings. Costs on appeal are taxed to the defendants/appellants.

                                            __________________________________
                                            SAMUEL L. LEWIS, JUDGE

CONCUR:

__________________________________
HENRY F. TODD, PRESIDING JUDGE,
MIDDLE SECTION

__________________________________
BEN H. CANTRELL, JUDGE

                                           -5-