Eastman Credit Union v. Bennett
| Decision Date | 31 March 2016 |
| Docket Number | No. E2015-01339-COA-R3-CV,E2015-01339-COA-R3-CV |
| Parties | EASTMAN CREDIT UNION v. THOMAS A. BENNETT |
| Court | Tennessee Court of Appeals |
Appeal from the Circuit Court for Unicoi County
This appeal involves the foreclosure sale of improved real property located in Erwin, Tennessee. The plaintiff lender filed a complaint seeking a foreclosure deficiency award in the amount of $53,489.59, plus interest and reasonable attorney's fees, pursuant to the promissory note. The defendant debtor asserted as an affirmative defense that the lender had purchased the property during a foreclosure sale for a sum materially less than the fair market value. Following a bench trial, the trial court found that the fair market value of the property was $158,900.00, an amount the lender had purportedly been offered by an employment relocation company prior to the foreclosure sale. The lender had purchased the home at foreclosure for $95,000.00. Finding the foreclosure sale price to be materially less than the fair market value, the trial court ruled that the debtor had successfully overcome the statutory presumption, pursuant to Tennessee Code Annotated § 35-5-118, that a foreclosure sale price is equal to fair market value. The court entered a deficiency judgment in favor of the lender in the amount of $9,659.62. The lender appeals. Discerning no reversible error concerning the award, we affirm. However, having determined that the promissory note provided for reasonable attorney's fees to the lender in the event of default, we remand for an evidentiary hearing on the amount of reasonable attorney's fees to be awarded for work performed during trial.
THOMAS R. FRIERSON, II, J., delivered the opinion of the court, in which D. MICHAEL SWINEY, C.J., and CHARLES D. SUSANO, JR., J., joined.
Samuel M. Booher and Andrew T. Wampler, Kingsport, Tennessee, for the appellant, Eastman Credit Union.
Douglas K. Shults, Erwin, Tennessee, for the appellee, Thomas A. Bennett.
OPINIONThe defendant, Thomas A. Bennett, originally purchased improved real property located at 110 Oakwood Lane in Erwin, Tennessee ("the Property") in October 2007. He financed the entire purchase price of $159,500.00 through the plaintiff, Eastman Credit Union ("Eastman"). The Property had been appraised at the time of purchase for the same amount as the purchase price. On August 19, 2009, Mr. Bennett refinanced his mortgage indebtedness by executing a promissory note in the amount of $166,500.00 payable to Eastman. To secure the promissory note, Mr. Bennett concomitantly executed a deed of trust, which was recorded with the Unicoi County Register of Deeds on the same day. An appraisal performed on the Property at the time of refinancing reflected a value of $187,000.00.
It is undisputed that Mr. Bennett last tendered payment to Eastman on December 1, 2010. Mr. Bennett testified that he began to miss payments after his employer, CSX Transportation ("CSX"), granted him a managerial opportunity and relocated his employment to Evansville, Indiana, in September 2010. Tara Lawson Rafalowski, the foreclosure coordinator who handled Mr. Bennett's loan, testified that she began contacting Mr. Bennett in November or December 2010 and communicated with him primarily via email. She acknowledged that Mr. Bennett advised her that he had been relocated to Indiana by his employer and that he was working with a relocation company. According to Ms. Rafalowski, Mr. Bennett sent her documents and attempted to persuade her to have Eastman stop foreclosure proceedings. Eastman sent a notice of foreclosure to Mr. Bennett in January 2011. Ms. Rafalowski stated that she "recall[ed] an email in February 2011 that [Mr. Bennett] was advised [by the relocation company] that he would have to come up with $8,000 out of pocket and that he just could not afford that."
Mr. Bennett testified that when he began working with Ms. Rafalowski, he facilitated her contact with a representative from the relocation company, Brookfield GRS ("Brookfield"), and gave Ms. Rafalowski and the Brookfield representative permission to discuss his financial situation. Mr. Bennett stated that according to Brookfield's representative and CSX's website, Brookfield would pay up to the original purchase price of the home. According to Mr. Bennett, Brookfield offered to pay $158,900.00 to purchase the Property once the Property had been on the market ninety days, a period that ended in early February 2011.1 Mr. Bennett stated that at Brookfield'srequest, two appraisals had been performed and that he understood it was Brookfield's policy to average two appraisal values as a basis for any offer made as part of its buy-out program. He acknowledged that he did not have copies of these two appraisals but maintained that Brookfield would have them.
Referencing his February 2011 email to Mr. Rafalowski, Mr. Bennett stated that he thought he would have to pay $8,000.00 out of pocket to pay off the loan after the relocation company paid $158,900.00. According to Mr. Bennett, he subsequently reviewed Eastman's payment records and realized that he would only have had to pay approximately $5,000.00. When questioned regarding whether he thought that Eastman representatives knew about Brookfield's offer to pay $158,900.00, Mr. Bennett responded, "I believe so."
At a foreclosure sale held on April 11, 2011, Eastman purchased the Property as the highest bidder for $95,000.00. No appraisal was performed at the time. The parties stipulated that at the time of the foreclosure sale, Mr. Bennett was indebted to Eastman for a total of $166,741.47, comprised of principal and late fees in the amount of $163,463.51 plus interest totaling $3,277.96. Eastman applied $94,656.35 to Mr. Bennett's principal balance and late fees. Upon subtracting $1,474.50 for costs of the foreclosure, legal expenses, and collection expenses, Eastman determined Mr. Bennett's total indebtedness following the foreclosure sale to be $73,215.97. In addition, interest at the original rate of 5.625% continued to accrue. In his response to Eastman's statement of "undisputed facts," Mr. Bennett disputed whether the $95,000.00 foreclosure sale price represented fair market value, but he did not otherwise dispute Eastman's calculations of the debt.
On July 29, 2011, Eastman sold the Property to a third party for $125,000.00. Upon this sale, Eastman credited to Mr. Bennett $17,748.07 against the principal owed on his loan and $3,277.96 against the interest, for a total of $21,026.23 credited. At that time, Mr. Bennett's total indebtedness to Eastman related to the promissory note was $53,489.59.
On March 16, 2012, Eastman filed a complaint seeking a foreclosure deficiency award in the amount of $53,489.59 plus interest at the rate of 5.625%. By the time of trial, Mr. Bennett's total indebtedness had increased through interest charges to $61,145.37. Eastman also requested post-judgment interest and attorney's fees. Mr. Bennett filed an answer, asserting as an affirmative defense that the Property had sold at foreclosure for materially less than its fair market value. On July 31, 2013, Eastman filed a motion for summary judgment, which the trial court denied on February 4, 2014,finding that a genuine issue of material fact existed regarding the fair market value of the Property at the time of foreclosure.
Following a bench trial conducted on October 28, 2014, the trial court concluded that it would be necessary to appoint an appraiser to determine the fair market value of the Property at the time of the foreclosure sale. In remarks made at the close of trial, the court stated that it found the $95,000.00 foreclosure sale price to be "nowhere close to the fair market value" and the 2009 appraised value of $187,000.00 to be "inflated." Mr. Bennett had testified that when he sought to refinance the mortgage in August 2009, he and his wife were seeking a loan to enable his wife to stay at home with their new child. According to Mr. Bennett, he was told by an Eastman representative that in order for him to obtain an equity loan, he would need the Property to be appraised for at least $187,000.00. He maintained that the Eastman loan representative told the property appraiser: "I need this house to appraise for $187,000.00."
On November 12, 2014, Eastman filed a motion requesting that the trial court reconsider its ruling to appoint a property appraiser, arguing that "[t]he Court should not now undertake to do what was within the defendant's discretion to do in his own proof." On November 25, 2014, the trial court entered an "Order Appointing Property Appraiser," appointing Campbell and Associates "for the purpose of establishing the fair market value of such property at the time of its foreclosure sale on April 11, 2011." However, this court-ordered appraisal was never performed.
The trial court subsequently entered a written "Opinion" on May 29, 2015, noting that "[n]either party provided a real estate appraisal as proof of the fair market value at the relevant time" and finding that "the offer made on the property in January, 2011, of $158,900.00 represented the fair market value of the property." The court further found that the foreclosure sale price of $95,000.00 was "materially less" than fair market value. On July 6, 2015, the trial court applied its findings regarding the fair market value to enter a judgment in favor of Eastman for a deficiency in the amount of $9,659.62. The court assessed costs equally against the parties. Although the court did not address Eastman's request for reasonable attorney's fees, the court certified its July 6, 2015 order as a final judgment pursuant to Tennessee Rule of Civil Procedure 54.02. Eastman timely appealed.
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