Branch Banking & Trust Co. v. Hill, E2018-00232-COA-R3-CV
| Citation | 582 S.W.3d 221 |
| Decision Date | 28 February 2019 |
| Docket Number | No. E2018-00232-COA-R3-CV,E2018-00232-COA-R3-CV |
| Parties | BRANCH BANKING AND TRUST COMPANY v. Wayne R. HILL et al. |
| Court | Court of Appeals of Tennessee |
John Frank Higgins, Nashville, Tennessee, for the appellants, Wayne R. Hill, Cornelia D. Hill, and Rainbow Ridge Resort, LLC.
John M. Kizer and W. Morris Kizer, Knoxville, Tennessee, for the appellee, Branch Banking and Trust Company.
Thomas R. Frierson, II, J., delivered the opinion of the court, in which John W. McClarty and Kenny W. Armstrong, JJ., joined.
In this action for a deficiency judgment following the foreclosure sale of six tracts of real property, some of which were improved by resort cabins, the trial court granted the plaintiff bank's motion for partial summary judgment against the defendant real estate developers and their limited liability company, for which the developers were guarantors, finding that the developers were liable for deficiency balances owed on promissory notes and guaranty agreements, as well as accrued interest, bank charges, late fees, and attorney's fees. Following a bench trial concerning the amounts owed, the trial court awarded money judgments to the bank in the amounts, respectively, of $1,180,223.77 against the developers as individuals and $144,848.30 against the developers' limited liability company. Finding, inter alia , that the developers had failed to properly plead the defense of inadequate foreclosure sales prices, the trial court sustained the bank's objections to the developers' requests to cross-examine the bank's witnesses and introduce additional evidence regarding the adequacy of the foreclosure sales prices and foreclosure process. The trial court subsequently denied the developers' motion to vacate the order granting the money judgments. The developers have appealed. Discerning no reversible error, we affirm.
The plaintiff, Branch Banking and Trust Company ("the Bank"), initiated the instant action by filing a complaint in the Sevier County Chancery Court ("trial court") on March 18, 2016, seeking a judgment for balances owed on promissory notes and guaranty agreements related to parcels of real property and resort cabins located in the Rainbow Ridge Resort project in Sevierville, Tennessee. The Bank also sought attorney's fees as provided for in the promissory notes at issue. The Bank initially named as defendants Wayne R. Hill and Cornelia D. Hill ("the Hills"); Rainbow Ridge Resort, LLC ("Rainbow Ridge"); Tyler C. Huskey, Successor Trustee ("Mr. Huskey"); the State of Tennessee ("the State"); and Rainbow Ridge Owners Association, Inc. ("the Owners Association"). The defendants involved in this appeal are the Hills and Rainbow Ridge (collectively, "Appellants"). It is undisputed that at all times relevant to this appeal, the Hills were the only members of Rainbow Ridge, a Tennessee limited liability company that had been administratively dissolved by the Tennessee Secretary of State in August 2011.
The Bank's claims against the Hills individually concerned allegations of default related to four promissory notes, identified in the complaint as "Note 4," "Note 9," "Note 14," and "Note 15" (collectively "the Hill Notes"). Attached as exhibits to the complaint were copies of the Hill Notes and corresponding deeds of trust, each of which had each been initially executed in 2005 or 2006 and duly recorded with the Sevier County Register of Deeds. Each of the deeds of trust included a clause following the specific property description stating: "TOGETHER WITH all rents, all improvements now or hereafter erected on the property, all easements, all fixtures, now or hereafter a part of said property...." Neither the original deeds of trust securing the Hill Notes nor the corresponding successor trustee deeds executed at the time of the foreclosure sales describe specific improvements. However, testimony presented during trial concerning the amounts of the deficiency judgments indicated that by the time of the foreclosure sales, three of the four land parcels encumbered by the Hill Notes (all but that encumbered by Note 4) had each been improved by the construction of a cabin.
At the time of trial, the Bank averred that the principal balance owed on Note 4 was $66,069.77 with accrued interest of $24,317.36 and bank charges of $3,339.38; the principal balance owed on Note 9 was $447,871.82 with accrued interest of $127,229.81 and bank charges of $4,368.00; the principal balance owed on Note 14 was $360,000.00 with accrued interest of $102,267.50 and bank charges of $1,100.00; and the principal owed on Note 15 was $359,040.00 with accrued interest of $101,994.78 and bank charges of $4,529.12.
The claims against Rainbow Ridge and the Hills, jointly and severally, involved a promissory note and guaranty agreement, identified as "the Rainbow Note," executed by the Hills on behalf of Rainbow Ridge in the original principal amount of $800,000.00 in March 2007. The documents pertaining to the Rainbow Note were also admitted as exhibits at trial. The Rainbow Note was partially secured by two simultaneously executed deeds of trust, encumbering, respectively, an 8.17-acre tract and a 16.8-acre tract of real property. The deeds of trust related to the Rainbow Note were duly recorded. Each deed of trust indicated that it "secure[d] an obligation incurred for the construction of an improvement on land...." The Bank alleged that Rainbow Ridge and the Hills, as guarantors, owed a principal amount on the Rainbow Note in the amount of $723,811.00, with accrued interest by the time of trial in the amount of $139,273.30 and bank charges of $5,575.00. W. Morris Kizer testified that at the time of the foreclosure sale on May 13, 2016, the 16.8-acre tract remained unimproved.1
For each of the Hill Notes, the Bank's allegations of default against the Hills included nonpayment of county real estate taxes on the encumbered properties and failure to pay the notes upon maturity. Concerning Note 4, the Bank also averred that the Hills had failed to pay a state tax lien against the encumbered property, the sole property encumbered by a Hill Note that had not been improved by a cabin. As to the Rainbow Note, the Bank's allegations of default against the Hills included nonpayment of county real estate taxes on the encumbered properties, failure to pay a state tax lien against the 8.17-acre tract, failure to pay the Rainbow Note upon its maturity, and the 2011 administrative dissolution of Rainbow Ridge as an LLC.
Based on a "dragnet clause" included in the amended and modified promissory note concerning Note 4, the Bank asserted in its complaint that Note 4 encumbered not only the 9.27-acre tract but also the other tracts encumbered by the Hill Notes and the Rainbow Note. The Bank thereby requested an order directing a judicial foreclosure of the 9.27-Acre Deed of Trust securing Note 4. See Higdon v. Regions Bank , No. E2009-01298-COA-R3-CV, 2010 WL 1924019, at *5 . The dragnet clause included in the most recently modified version of Note 4 provides in pertinent part:
[I]n the event of a default under any of the Agreements or any other obligation of Borrowers ... then any one of the same shall be a material default hereunder, and this Note and any other indebtedness due the Bank by Borrowers shall immediately become due and payable at the option [o]f the Bank without notice, or demand of any kind, which are hereby waived.
An essentially identical dragnet clause is included in the most recently modified version of each of the promissory notes at issue.
Appellants and the Owners Association responded to the complaint by filing a motion to dismiss and subsequent corrected motion to dismiss, asserting, inter alia , that the Bank had improperly split its claims because among the claims included in the instant complaint were ones related to cabins and tracts of real property that were the partial subject of litigation pending in the appellate process at the time. As to Mr. Huskey, the Bank had clarified in its complaint that it had named Mr. Huskey as a defendant "solely in his capacity as the successor trustee" under the deed of trust for the 9.27-acre tract securing Note 4 upon an "Appointment of Successor Trustee" executed by the Bank on March 15, 2016, and recorded with the Register of Deeds on the next day. Mr. Huskey did not participate in the filing of the motion to dismiss. The Bank filed a response on August 3, 2016, objecting to the corrected motion to dismiss.
In the related action involving Appellants and the Bank, this Court entered a decision on December 28, 2016. See Rainbow Ridge Resort, LLC v. Branch Banking & Trust Co. , 525 S.W.3d 252 (Tenn. Ct. App. 2016), perm. app. denied (" Rainbow Ridge Resort "). In Rainbow Ridge Resort , this Court summarized the underlying facts, procedural history, and ultimate affirmance of the trial court's dismissal of that action, which had been initiated by Appellants against the Bank, as follows:
The facts in this case implicate the doctrine of res judicata. In 2012, a real estate development limited liability company and its members filed suit in the Sevier County Circuit Court against their mortgage lender, Branch Banking and Trust Company (the bank). In that action, the developers alleged, inter alia , that the bank was guilty of fraud, breach of contract, and unjust enrichment. That suit involved four separate parcels of real property. Whil...
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