ABN Amro Mortg. Grp., Inc. v. S. Sec. Fed. Credit Union

• Decision Date: 09 December 2011
• Docket Number: No. W2011–00693–COA–R3–CV.,W2011–00693–COA–R3–CV.
• Citation: 372 S.W.3d 121
• Parties: ABN AMRO MORTGAGE GROUP, INC. v. SOUTHERN SECURITY FEDERAL CREDIT UNION.
• Court: Tennessee Court of Appeals

372 S.W.3d 121

ABN AMRO MORTGAGE GROUP, INC.

v.SOUTHERN SECURITY FEDERAL CREDIT UNION.

No. W2011–00693–COA–R3–CV.

Court of Appeals of Tennessee,

Western Section, at Jackson.

Oct. 26, 2011 Session.

Nov. 17, 2011.

Reconsideration

Denied Dec. 9, 2011.

Application for Permission to Appeal

Denied by Supreme Court

April 11, 2012.

Harold D. Mangrum, Memphis, Tennessee, for the appellant, Southern Security Federal Credit Union.

T. Tarry Beasley, II, Memphis, Tennessee, for the appellee, ABN AMRO Mortgage Group, Inc.

J. STEVEN STAFFORD, J., delivered the opinion of the Court, in which ALAN E. HIGHERS, P.J., W.S. and DAVID R. FARMER, J., joined.

OPINION

J. STEVEN STAFFORD, J.

Appellant, the second mortgage holder on the subject property, appeals the trial court's determination that Appellee held a valid first mortgage on the property, when Appellee's mortgage was taken under a deed of trust that contained a scrivener's error that incorrectly identified the property's lot number. The trial court held that: (1) the scrivener's error was not fatal to Appellant's deed of trust as the instrument otherwise clearly identified the property; (2) Appellant's mortgage was superior to Appellee's; and (3) Appellee's bid at Appellant's foreclosure sale created a valid contract, under which Appellee owed Appellant the purchase price. Finding no error, we affirm.

On or about March 29, 2002, Charles A. Giacosa and his wife, Pamela Giacosa (the “Giacosas”) obtained a first mortgage from First Residential Mortgage–Louisville on property known as 8320 Bon Lin Drive, Bartlett, Tennessee (the “Property”) and more particularly described as:

Lot 10, Rolling Woods Subdivision, as shown on plat of record in Plat Book 38, Page 8, in the Register's Office of Shelby County, Tennessee, to which plat reference is hereby given for a more particular description of said property.

This being the same property as conveyed to Charles Giacosa and wife, Pamela Giacosa from Roland J. Holeczko and Candace D. Holeczko, husband and wife by Warranty Deed dated May 23, 2001, recorded June 29, 2001, in Book LD, Page 1101 in the Register's Office of Shelby County, Tennessee.

Parcel ID # B01–58–00277.

To secure the first mortgage, which was in the amount of $165,600.00, the Giacosas executed and delivered a Deed of Trust (the “First Deed of Trust”) to First Residential Mortgage–Louisville, with Transcontinental Title as trustee. The First Deed of Trust was recorded on or about April 12, 2002, in the office of the Shelby County Register of Deeds, as Instrument No. 02–063717. At the time the First Deed of Trust was prepared, the lot numberwas erroneously listed as Lot 16, rather than Lot 10, which is the correct lot number. According to the subsequent foreclosure sale notification, ABN AMRO Mortgage Group, Inc. (“ABN”) is the transferee/assignee of the First Deed of Trust.

On or about May 16, 2002, the Giacosas obtained a second mortgage on the Property (the “HELOC”) from Southern Security Federal Credit Union (“Southern Security,” or “Appellant”). The HELOC, which had a maximum principal amount of 41,400.00, was secured by a Deed of Trust (the “Second Deed of Trust”) that was executed by the Giacosas in favor of Southern Security. The Second Deed of Trust was recorded on or about May 22, 2002, in the Office of the Register of Shelby County, as Instrument No. 02–086888. The legal description contained in the Second Deed of Trust correctly identified the Property as Lot 10.

It appears from the record, and particularly from the Affidavit of Jeri Keith, a loan officer for Southern Security, that Southern Security was aware, at the time of the execution of the Second Deed of Trust, that ABN held a first mortgage on the Property. According to Jeri Keith's Affidavit, the HELOC paperwork submitted by the Giacosas clearly indicated that ABN held the first mortgage on the property. Furthermore, Southern Security's own title search revealed the First Deed of Trust.

The Giacosas ultimately defaulted on the first mortgage held by ABN. Thereafter, ABN began foreclosure proceedings, including advertising the foreclosure sale of the Property as “Lot 10.” ABN appointed Priority Trustee Services of Tennessee, L.L.C. (together with ABN, “Appellees”) as its Substitute Trustee. On April 13, 2006, Priority Trustee Services, on behalf of ABN, held a foreclosure sale as advertised and in accordance with the Bid Instruction Sheet and Tennessee law. Southern Security appeared at the sale, bidding $197,165.00 for the Property. As the successful bidder, Southern Security then tendered payment by cashier's check. Thereafter, by letter of April 17, 2006, Southern Security, by and through its Senior Vice President Joseph Reed, advised ABN that it had issued a stop payment order on the cashier's check. As grounds for the stop payment, Mr. Reed asserted Southern Security's belief that ABN did not hold a valid first mortgage on the Property, and that Southern Security was actually the first mortgage holder. On April 20, 2006, Southern Security held a foreclosure sale of the Property, claiming that ABN was a “subordinate lienholder.” ¹

On April 21, 2006, ABN filed suit against Southern Security, its Substitute Trustee Harold Mangrum, and the Giacosas, seeking reformation of the First Deed of Trust to correct the scrivener's error, which erroneously identified the Property as Lot 16, rather than Lot 10.² By its complaint, ABN also asked the court to establish it as the first mortgage holder on the Property. Furthermore, ABN sought to enjoin Southern Security and Harold Mangrum from conducting any sale of the Property.

A hearing on the request for injunctive relief was held on May 2, 2006. By Order of May 5, 2006, the trial court found that ABN's request for an injunction was moot because the foreclosure sale had already occurred on April 20, 2006. On September 20, 2006, ABN was granted leave to file an amended complaint, which removed the request for injunctive relief and requested that Southern Security's foreclosure sale be set aside as it was based upon Southern Security's mistaken belief that it was the first mortgage holder.

Additional litigation followed, including the denial of ABN's motion for summary judgment. These proceedings are not relevant to the instant appeal and we will not tax the length of this opinion to recite that history herein. Suffice to say, a final hearing was held on February 3 and 17, 2011. By Order of February 25, 2011, the trial court found, in relevant part, as follows:

3. Joseph Reed, on behalf of ... Southern Security ... attended the foreclosure sale [i.e., the first foreclosure sale held by ABN] and bid $197,165.00 for the purchase of [ABN's] interest in the subject real property. Said bid having been accepted by Richard Fulton [acting as Substitute Trustee for ABN], the sale was completed and memorialization of said sale was given by Joseph Reed's tendering of Southern Security's check in the amount of $197,165.00 to Richard Fulton. The tendering of funds by Southern Security ... confirmed the contract entered into by the parties pursuant to the published Notice of Foreclosure.

4. Southern Security ... asserted an issue with the title on the real property known as 8320 Bon Lin ... due to a scrivener's error in the lot number reflected on the original Trust Deed; however, the address of the property, the parcel number, the derivation clause, and other information contained on the face of said original Trust Deed clarifies the specific property purchased by [Southern Security] from [ABN] at foreclosure.

5. [ABN] has a duty to transmit a defendable Trustee's Deed to [Southern Security].

* * *

7. [ABN] has a right to specific performance of the contract from [Southern Security] pursuant to the foreclosure sale held by [ABN].

Based upon these findings, the court ordered ABN to issue a substitute deed of trust in favor of Southern Security in order to correct the scrivener's error. The trial court further ordered Southern Security to issue payment in the amount of $197,165.00 to ABN; however, ABN's request for interest and attorney's fees was denied.

Southern Security appeals and raises one issue for review as stated in its brief:

Did the Chancery Court err in finding a binding contract between the parties and giving the remedy of specific performance to [ABN] when [ABN] knowingly foreclosed on a deed of trust, which was filed against the wrong property and failed to correct it before the foreclosure?

Because this case was tried by the court, sitting without a jury, this Court conducts a de novo review of the trial court's decision with a presumption of correctness as to the trial court's findings of fact, unless the evidence preponderates against those findings. Wood v. Starko, 197 S.W.3d 255, 257 (Tenn.Ct.App.2006). For the evidence to preponderate against a trial court's finding of fact, it must support another finding of fact with greater convincing effect. Walker v. Sidney Gilreath & Assocs., 40 S.W.3d 66, 71 (Tenn.Ct.App.2000); The Realty Shop, Inc. v. R.R. Westminster Holding, Inc., 7 S.W.3d 581, 596 (Tenn.Ct.App.1999).

A determination of the priority of rights among the holders of liens and mortgages is solely a question of law when the parties do not dispute the facts. Bankers Trust Co. v. Collins, 124 S.W.3d 576, 578 (Tenn.Ct.App.2003); ATS, Inc. v. Kent, 27 S.W.3d 923, 924(Tenn.Ct.App.1998) (citing Lucius v. City of Memphis, 925 S.W.2d 522, 522 (Tenn.1996)). When addressing questions of law, we review the trial court's ruling de novo upon the record and afford to it no presumption of correctness. ATS, Inc., 27 S.W.3d at 924.

From our reading of its appellate brief, Southern Security makes four arguments, namely: (1) that ABN was without standing to foreclose on the property, or to bring suit against Southern Security; (2) that ABN violated several maxims and principles of equity when it attempted to foreclose on an incorrect deed of trust because...