First Cmty. Mortg., Inc. v. Appraisal Servs. Grp., Inc.

• Decision Date: 16 September 2021
• Docket Number: W2020-01246-COA-R3-CV
• Citation: 644 S.W.3d 354
• Parties: FIRST COMMUNITY MORTGAGE, INC. v. APPRAISAL SERVICES GROUP, INC. et al.
• Court: Tennessee Court of Appeals

644 S.W.3d 354

FIRST COMMUNITY MORTGAGE, INC.

v.APPRAISAL SERVICES GROUP, INC. et al.

No. W2020-01246-COA-R3-CV

Court of Appeals of Tennessee, AT JACKSON.

September 16, 2021 Session

FLED November 29, 2021

Brock East and Benjamin Lewis, Murfreesboro, Tennessee, for the appellant, First Community Mortgage, Inc.

Adam P. Nelson and Bradford G. Box, Jackson, Tennessee, for the appellees, Appraisal Services Group, Inc., and Deana L. Miles.

J. Steven Stafford, P.J., W.S., delivered the opinion of the court, in which Kenny Armstrong and Carma Dennis McGee, JJ., joined.

J. Steven Stafford, P.J.

A mortgage company appeals the dismissal of its lawsuit against an appraisal company and its employee as barred by the applicable statute of limitations. The appraisal company and its employee urge this Court to affirm the dismissal of the lawsuit and to award them attorney's fees under Tennessee Code Annotated section 20-12-119(c). We affirm the dismissal of the mortgage company's action against the appraisal company and its employee. We conclude, however, that section 20-12-119(c) does not authorize the award of attorney's fees incurred for appellate work.

I. FACTUAL AND PROCEDURAL HISTORY

On September 12, 2019, Plaintiff/Appellant First Community Mortgage, Inc. ("Appellant") filed a complaint for damages against various defendants, including Defendant/Appellee Appraisal Services Group, Inc. ("Appraisal Services") in the Rutherford County Chancery Court.¹ Because this case was resolved by a motion to dismiss, we take the facts from the complaint. The complaint alleged that in 2015, property owner Phil D. Finch arranged to refinance real property located in Weakley County, Tennessee. Mr. Finch contracted with Traditional Home Mortgage, Inc. ("Traditional Home Mortgage") for the refinance. Traditional Home Mortgage hired Appraisal Services to perform appraisal services related to the loan, which they completed in 2015. According to the complaint, however, Appraisal Services negligently failed to discover or disclose the existence of an encroachment issue during their appraisal, whereby improvements on the subject property extended across a property line, encroaching onto a neighboring tract of land.

The alleged negligence was not discovered at the time, and the refinance loan was completed, secured by the underlying real property. Appellant eventually purchased the mortgage from Traditional Home Mortgage. Appellant then sold the mortgage to AmeriHome Mortgage Company, LLC ("AmeriHome Mortgage"). AmeriHome Mortgage sold the property to Federal National Mortgage Association ("FNMA"). During an audit, FNMA discovered the encroachment issue; according to the complaint, one-half of Mr. Finch's home and swimming pool were actually located on a neighboring tract of land. FNMA thereafter requested that AmeriHome repurchase the mortgage, which it did. AmeriHome next requested that Appellant repurchase the mortgage; the repurchase occurred in January 2018.

On June 7, 2019, the underlying property was sold at foreclosure. The foreclosure sale left a deficit of over $100,000.00, borne by Appellant. According to the complaint, Appellant would not have been required to repurchase the property but for the encroachment issues; Appellant would therefore not have suffered any losses as a result of the foreclosure of the property. The complaint further alleged that Appellant's damages were the direct and proximate result of Appraisal Services’ negligence in failing to discover or disclose the encroachment issues during the 2015 appraisal. Appellant therefore requested both compensatory and punitive damages, along with interest, attorney's fees, and costs.

As is relevant to this appeal, on October 28, 2019, Appraisal Services filed its first motion to dismiss the complaint on the basis of improper venue, lack of subject matter jurisdiction, and failure to state a claim due to the expiration of the applicable statute of limitations, Tennessee Code Annotated section 28-3-104(d). Appraisal Services filed an amended motion to dismiss on November 6, 2019, which more fully set forth its statute of limitations defense. In both its initial motion and its amended motion to dismiss, Appraisal Services also argued that it should be awarded attorney's fees pursuant to Tennessee Code Annotated section 20-12-119(c).

Appellant responded in opposition to Appraisal Source's motion to dismiss on November 18, 2019. Therein, Appellant argued that the trial court had subject matter jurisdiction, and that Rutherford County was a proper venue, but that the case could be transferred to the proper venue if necessary, pursuant to Tennessee Code Annotated section 16-1-116. Appellant also argued that its claim was timely as the statute of limitations contained in section 28-3-104(d) was enacted after the appraisal in this case and therefore inapplicable. Appellant further argued that to apply section 28-3-104(d) retroactively would impair its vested right. Appraisal Services thereafter promptly replied to Appellant's response.

On December 10, 2019, the Rutherford County Chancery Court entered an order transferring this case to Weakley County Chancery Court ("the trial court"). On or about February 14, 2020, Appellant filed an amended complaint in the trial court, which named Appraisal Source's employee, Deana L. Miles (together with Appraisal Services, "Appellees"), as an additional defendant. The amended complaint raised three causes of action: declaratory judgment, negligence, and breach of contract. Appellant did not allege, however, that Appellees breached any contract; the breach of contract allegations concerned other defendants. On February 21, 2020, Appraisal Services filed a reply in further support of its motion to dismiss on the basis of the expiration of the applicable statute of limitations. On April 28, 2020, Appellees filed a joint motion to dismiss the amended complaint on the same basis; the joint motion was accompanied by a memorandum of law. Neither the joint motion to dismiss nor the memorandum of law referenced a request for attorney's fees under section 20-12-119(c).

On August 12, 2020, the trial court entered a lengthy order granting Appellees’ motion to dismiss. Therein, the trial court ruled that the "negligence occurred no later than January of 2018" and that under section 28-3-104(d), Appellant was required to file its complaint within one year of that date, or no later than January 2019. The trial court rejected Appellant's argument that section 28-3-104(d) was inapplicable, as it determined that the statute applied to actions accruing on or after July 1, 2017; because Appellant's cause of action accrued well after that date, in January 2018, the statute was applicable, and Appellant's complaint was untimely. The trial court further rejected Appellant's argument that the claim did not accrue until June 2019, as the accrual occurred when Appellant was forced to repurchase the property, not when the foreclosure sale occurred. Because the complaint was not timely filed, the trial court ruled that it must be dismissed. The trial court also ruled that "[a]ny costs or expenses potentially allowable to [Appellees] under Tenn. Code Ann. § 20-12-119(c) are stayed and reserved at this time pursuant to Tenn. Code Ann. § 20-12-119(c)(3)." Finally, the trial court designated its ruling as final pursuant to Rule 54.02 of the Tennessee Rules of Civil Procedure. Appellant filed a timely notice of appeal on September 11, 2020.

II. ISSUES PRESENTED

Appellant raises a single issue in this case: "Whether the trial court erred in granting Appellees’ motion to dismiss the first amended complaint for failure to state a claim upon which relief can be granted pursuant to Tennessee Rules of Civil Procedure 12.02(6)." As an additional issue, Appellees request attorney's fees pursuant to Tennessee Code Annotated section 20-12-119(c).

III. STANDARD OF REVIEW

The standard of review regarding dismissal at the motion to dismiss stage is well-settled. Under the standard of review applicable to motions to dismiss, review is "limited to an examination of the complaint alone." PNC Multifamily Capital Institutional Fund XXVI Ltd. P'ship v. Bluff City Cmty. Dev. Corp. , 387 S.W.3d 525, 537 (Tenn. Ct. App. 2012) (citing Wolcotts Fin. Serv., Inc. v. McReynolds , 807 S.W.2d 708, 710 (Tenn. Ct. App. 1990) ). "The basis for the motion is that the allegations in the complaint, when considered alone and taken as true, are insufficient to state a claim as a matter of law." PNC , 387 S.W.3d at 537. In considering such a motion, the court should construe the complaint liberally in favor of the plaintiff, taking all the allegations of fact therein as true. See Cook ex rel. Uithoven v. Spinnaker's of Rivergate, Inc. , 878 S.W.2d 934, 938 (Tenn. 1994). However, we are not required to accept as true conclusions of law. Riggs v. Burson , 941 S.W.2d 44, 47–48 (Tenn. 1997). An appellate court should uphold the grant of a motion to dismiss only when it appears that the plaintiff can prove no set of facts in support of a claim that will entitle him or her to relief. Young v. Barrow , 130 S.W.3d 59, 63 (Tenn. Ct. App. 2003). We review the trial court's decision on a motion to dismiss de novo without a presumption of correctness. Phillips v. Montgomery Cnty. , 442 S.W.3d 233, 237 (Tenn. 2014).

IV. DISCUSSION

A.

In support of its contention that the trial court erred in granting Appellees’ motion to dismiss, Appellant essentially makes three alternative arguments: (1) that the statute of limitations relied upon by the trial court, Tennessee Code Annotated section 28-3-104(d), is inapplicable; (2) that if applicable, application of section 28-3-104(d) impairs Appellant's vested right; and (3) the trial court erred in concluding that the cause of action at issue accrued in January 2018. We will consider each argument in turn.

The parties first disagree regarding whether the statute of limitations relied on by the trial...