Court Opinion

ID: 1047328
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:44:43.921854+00
Date Added: 2024-06-11T12:53:26.961603
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                                 AT JACKSON
                                     October 25, 2011 Session

           JANICE BROOKS, ET AL. v. RIVERTOWN ON THE ISLAND
                    HOMEOWNER ASSOCIATION, INC.

                 Direct Appeal from the Chancery Court for Shelby County
                    No. CH-10-1088-2     Arnold B. Goldin, Chancellor

                   No. W2011-00326-COA-R3-CV - Filed December 6, 2011

Appellee filed an action to set aside Defendant Homeowners’ Association non-judicial
foreclosure sale of a condo unit for allegedly unpaid homeowners’ association fees. The trial
court set aside the sale upon determining that there was no credible basis upon which to
determine the amount due at the time of the sale. We affirm.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
                                  and Remanded

D AVID R. F ARMER, J., delivered the opinion of the Court, in which A LAN E. H IGHERS, P.J.,
W.S., and H OLLY M. K IRBY, J., joined.

Robin H. Rasmussen and James O. Evans, Memphis, Tennessee, for the appellant, Rivertown
On The Island Homeowner Association, Inc.

Paul J. Springer, Memphis, Tennessee, for the appellees, Janice Brooks and Cedrick Wilson.

                                   MEMORANDUM OPINION 1

       1
           Rule 10 of the Rules of the Court of Appeals of Tennessee provides:

       This Court, with the concurrence of all judges participating in the case, may affirm, reverse
       or modify the actions of the trial court by memorandum opinion when a formal opinion
       would have no precedential value. When a case is decided by memorandum opinion it shall
       be designated “MEMORANDUM OPINION”, shall not be published, and shall not be cited
       or relied on for any reason in any unrelated case.
        This appeal arises from a complaint for temporary injunction or restraining order filed
in the Chancery Court for Shelby County by Cedrick Wilson (Mr. Wilson) and Janice Brooks
(Ms. Brooks, collectively, “Plaintiffs”), seeking to set aside a non-judicial foreclosure sale
of a condominium unit on North Island Drive in Memphis. In their complaint, Plaintiffs
asserted that, on May 14, 2010, Defendant Rivertown On The Island Homeowner
Association, Inc.2 (“Rivertown”) wrongfully conducted a foreclosure sale of the unit on the
basis of an arrearage in that amount of $12,828 in homeowners assessment fees from May
2008. Plaintiffs asserted that Mr. Wilson had purchased the unit in May 2008 for $321,000;
that the unit was not subject to a mortgage; and that Mr. Wilson conveyed the unit to Ms.
Brooks in January 2010. Plaintiffs further alleged that approximately $6,734.40 of the
alleged deficiency in assessment fees were in fact attorney’s fees; and that Rivertown
purchased the property for $12,828. Plaintiffs also asserted that Rivertown knowingly and
intentionally misrepresented that Plaintiffs had paid no assessment fees; that Rivertown’s
own ledger showed that fees of least $3,003 had been made between May 1,2008, and
August 2009; and that at least one additional payment in the amount of $225 had been
confirmed. Plaintiffs asserted the sale was not made in accordance with the Master Deed.
Plaintiffs further asserted that on May 14, 2010, Rivertown had filed a Forcible Entry
Detainer in the Shelby County General Sessions Court. Plaintiffs sought an injunction
enjoining Rivertown from evicting Ms. Brooks; an accounting to determine the amount of
assessments due; a determination that the foreclosure sale was void; and transfer of title to
the property back to Ms. Brooks. Plaintiffs also sought damages in an amount to be
determined by the court, and asserted a claim under the Tennessee Consumer Protection Act.

       Rivertown answered in June 2010. In its answer, Rivertown admitted that the basis
of the non-judicial foreclosure sale was outstanding assessment fees, attorney’s fees, and
expenses in the amount of $12,828.46. It denied allegations of wrong-doing, asserting the
sale was conducted in accordance with the Master Deed and that the property was sold to the
highest bidder for $12,828.46. Rivertown admitted that the foreclosure sale occurred without
the consent of Mr. Wilson or Ms. Brooks, and that it purchased the property for $12,828.46
as the highest bidder.

       The matter was heard in September and October, 2010. The trial court determined
that Mr. Wilson lacked standing to contest the foreclosure sale where he had conveyed the
property to Ms. Brooks, and dismissed him from the action. The trial court also dismissed

       2
         The original complaint states the Defendant’s name as Rivertown On The Island Homeowner
Association, Inc. However, on the Defendant/Appellant’s brief, as well as various places throughout the
record, Defendant/Appellant’s name is referred to as Rivertown On The Island Condominium Owners
Association, Inc. For consistency and clarity we will refer to Defendant/Appellant as Rivertown On The
Island Homeowner Association, Inc. (“Rivertown”).

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the consumer protection act claim, but specifically found that the claim was brought in good
faith. After making extensive findings of fact, the trial court set aside the foreclosure sale
and ordered title to the property to be revested into Ms. Brooks. The trial court dismissed Ms.
Brooks claims for damages and all outstanding claims. Final judgment was entered in the
matter on January 27, 2011, and Rivertown filed a timely notice of appeal to this Court.

                                       Issues Presented

       Rivertown raises the following issues for our review:

       1.      [Whether] the trial court incorrectly applied Tennessee law regarding
               foreclosure sales to the facts of this case.

       2.      [Whether] the trial court was unfairly biased against the Association.

                                      Standard of Review

        We review the trial court’s findings of fact de novo, with a presumption of
correctness, and will not reverse those findings unless the evidence preponderates against
them. Tenn. R. App. P. 13(d); Berryhill v. Rhodes, 21 S.W.3d 188, 190 (Tenn. 2000). Insofar
as the trial court’s determinations are based on its assessment of witness credibility, we will
not reevaluate that assessment absent evidence of clear and convincing evidence to the
contrary. Jones v. Garrett, 92 S.W.3d 835, 838 (Tenn. 2002). Our review of the trial court’s
conclusions on matters of law, however, is de novo with no presumption of correctness.
Taylor v. Fezell, 158 S.W.3d 352, 357 (Tenn. 2005). We likewise review the trial court’s
application of law to the facts de novo, with no presumption of correctness. State v. Thacker,
164 S.W.3d 208, 248 (Tenn. 2005).

                                          Discussion

        We first address Rivertown’s assertion that the trial court was biased against it.
Rivertown cites us to no motion for recusal in the record, and we find none. Rivertown
asserts, however, that the trial court expressed a bias against it at the outset of the litigation
by expressing its discomfort with a foreclosure sale in the amount of approximately $12,000
of a property valued in excess of $300,000 on the basis of unpaid homeowners’ association
fees in an uncertain amount. It is well-settled that a party may lose the right to assert bias and
challenge a judge’s impartiality in the absence of a motion for recusal filed soon after the
facts giving rise to the allegation of bias become known. E.g., Eldridge v. Eldridge, 137
S.W.3d 1, 8 (Tenn. Ct. App. 2002)(citations omitted). The failure to file a motion for recusal
results in a waiver of the issues. Id. Accordingly, in light of the absence of a motion to

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recuse, Rivertown waived this issue.

       We next turn to Rivertown’s assertion that the trial court incorrectly applied
Tennessee foreclosure law and set aside the foreclosure of Ms. Brooks’ condo unit.
Rivertown relies on Holt v. Citizens Central Bank, 688 S.W.2d 414 (Tenn. 1984), for the
proposition that the trial court erred by setting aside the foreclosure sale on the grounds that
the foreclosure sale in the amount of approximately $12,000 of a property valued in excess
of $300,000 shocked the conscience of the court. Rivertown asserts that, under Holt, if the
foreclosure sale is legally held and conducted, it can be set aside only where there is evidence
that some misconduct or fraud on the part of the trustee or mortgagee contributed to the
inadequacy of the sale price. Rivertown acknowledges, however, that the trial court held that
the inadequate purchase price and irregularities in Rivertown’s bookkeeping procedures
warranted the setting aside of the foreclosure sale.

        In Holt, the Supreme Court abandoned the rule that a foreclosure sale could be set
aside “solely on the conscience shocking inadequacy of price.” Holt, 688 S.W.2d at 416.
Contrary to Rivertown’s assertion, however, we do not read Holt as suggesting that, as long
as the actual foreclosure sale is legally held and conducted, it will not be set aside. The Holt
court stated, “that lone infirmity [inadequacy of sale price] will no longer justify voiding a
foreclosure sale.” Id.

       The present case concerns a non-judicial foreclosure sale. In addition to finding that
the foreclosure sale price shocked the conscience of the court, the trial court determined that
various irregularities in Rivertown’s bookkeeping justified setting aside the sale. In its
January 27 order, the trial court found that it was “unclear as to what amount would have
brought Plaintiff to a zero balance on assessments[.]” In its findings of fact, the trial court
found that Mr. Wilson had purchased the property for $321,740.00 in a cash sale; that the
Master Deed required the payment of an assessment in the amount of $199.00 per month; that
between November 2008 and January 2009, Rivertown sent Mr. Wilson several demands for
the payment of assessments; and that Mr. Wilson made various payments. The trial court
found that, contrary to Ms. Brooks’ assertion, Rivertown had passed an amendment to the
Master Deed permitting a non-judicial foreclosure with a 30-day notice provision, and that
the amendment was recorded in the Shelby County Register’s Office. It further found that
Rivertown began the non-judicial foreclosure proceeding in late 2009, and that Mr. Wilson
quitclaimed the property to Ms. Brooks, his mother, in January 2010.

       The trial court also made findings detailing the correspondence by Rivertown to Mr.
Wilson and Ms. Brooks, and the payments made by Mr. Wilson. Upon review of the record,
we cannot say the trial court erred in finding irregularities in Rivertown’s bookkeeping, or
in determining that it remained unclear what amount Ms. Brooks could have paid to bring

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the account to zero. The trial court found that Mr. Wilson was never notified that his
payments were being reduced by Rivertown’s attorney’s fees; that the amounts listed in the
notices did not include those fees; that some amounts paid by Mr. Wilson were not credited
until after the foreclosure sale; and that the account was not adjusted to show the correct
amount until September 28, 2010, the day before trial. The trial court concluded that, on the
date of the foreclosure, the amount owed was $6,405.52, which included damages from a
prior judgment rendered in favor of Rivertown for property damage cause by Mr. Wilson’s
dog. The evidence in the record does not preponderate against these findings, and Rivertown
does not dispute them.

        Without opining on whether the amount of damages owed by Mr. Wilson by reason
of the prior judgment in favor of Rivertown was properly included in the assessment amounts
owed by Ms. Brooks, we agree with the trial court that these bookkeeping, accounting, and
notice irregularities warrant setting aside the foreclosure sale. Rivertown never notified Ms.
Brooks of an amount certain that could be paid to avoid foreclosure. Further, Rivertown was
unable to provide a correct accounting until the day this matter was tried. Although the
shocking inadequacy of the foreclosure sale price, standing alone, would not be grounds for
setting the sale aside, the inadequacy of notice and the undisputed accounting and
bookkeeping irregularities warrant the trial court’s judgment in this case. The non-judicial
foreclosure proceedings in this case arose from sloppy bookkeeping making it impossible to
determine the amount owed.

        We do not believe Holt stands for the proposition that a homeowner’s association may
conduct a non-judicial foreclosure sale without an accurate accounting of the amount owed,
and without an accurate notice to the homeowner of the amount certain which must be paid
on a date certain to avoid foreclosure. Assuming the supreme court’s holding in Holt is
applicable to a non-judicial foreclosure sale on the basis of unpaid homeowner association
fees, the foreclosure sale cannot be conducted before the correct determination of the sum
actually owed. This runs counter to our notions of fairness.

                                          Holding

       In light of the foregoing, the judgment of the trial court is affirmed. Costs of this
appeal are taxed to Rivertown On The Island Homeowner Association, Inc., and its surety,
for which execution may issue if necessary.

                                                   _________________________________
                                                   DAVID R. FARMER, JUDGE

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