Guffey v. Creutzinger

• Decision Date: 15 June 1998
• Citation: 984 S.W.2d 219
• Parties: Kenny GUFFEY, d/b/a Kenny Guffey Construction Company, Plaintiffs-Appellants, v. David J. CREUTZINGER, and Janice K. Creutzinger, Owners, First Tennessee Bank National Association, J. Michael Winchester, Trustee, Defendants-Appellees, David J. Creutzinger, Individual Heir and Personal Representative of the Estate of Albert Federick Creutzinger, and Joyce Gerhardstein, Individual Heir and Personal Representative of the Estate of Albert Frederick Creutzinger, and Rob Gratigny, Trustee, Defendants.
• Court: Tennessee Court of Appeals

Page 219

984 S.W.2d 219

Kenny GUFFEY, d/b/a Kenny Guffey Construction Company Plaintiffs-Appellants, v. David J. CREUTZINGER, and Janice K. Creutzinger, Owners First Tennessee Bank National Association, J Michael Winchester, Trustee, Defendants-Appellees David J. Creutzinger, Individual Heir and Personal Representative of the Estate of Albert Federick Creutzinger, and Joyce Gerhardstein, Individual Heir and Personal Representative of the Estate of Albert Frederick Creutzinger, and Rob Gratigny, Trustee, Defendants.

Court of Appeals of Tennessee, Western Section, at Knoxville.

June 15, 1998.

Application for Permission to Appeal

Denied by Supreme Court

Nov. 9, 1998.

Kenneth W. Holbert, Finkelstein, Kern, Steinberg & Cunningham of Knoxville, Jerry K. Galyon, Galyon & Stokes of Sevierville, for Appellants.

J. Michael Winchester, Gordon D. Foster, Lacy & Winchester, P.C., of Knoxville, for Appellees, First Tennessee National Association and J. Michael Winchester, Trustee.

CRAWFORD, Presiding J., Western Section.

This case involves priority of liens on real estate. Plaintiff, Kenny Guffey d/b/a Kenny Guffey Construction Company (Guffey), filed suit for declaratory judgment and other relief against defendants, David J. Creutzinger and Janice K. Creutzinger, First Tennessee Bank, N.A., and J. Michael Winchester, Trustee, seeking to establish that the plaintiff's judgment lien is superior to the bank's mortgage lien. ¹ The facts are not in dispute. On June 15, 1995, Guffey obtained a judgment against defendants David and Janice Creutzinger in the amount of $67,140.95, plus costs and interest. A certified copy of the judgment was duly recorded in June and July, 1995 in the Register's Office of Sevier County, Tennessee.

By warranty deed dated November 27, 1995, Robert and Linda Parker conveyed Sevier County real property, which is the subject of this suit, to the Creutzingers. By trust deed dated November 27, 1995, the Creutzingers conveyed the subject property to J. Michael Winchester, Trustee, for First Tennessee Bank to secure the payment of a note signed by the Creutzingers payable to the bank in the amount of $113,000.00. Both the warranty deed and the trust deed were recorded in the Register's Office of Sevier County, Tennessee, on November 29, 1995 at 10:31 A.M Guffey filed a motion for summary judgment, asserting that his judgment lien has priority over defendants' mortgage lien because it was recorded prior thereto. The bank and Winchester filed a motion for summary judgment based on their assertion that their mortgage interest has priority because it is a "purchase money mortgage." The bank's summary judgment motion is supported by the affidavit of David W. Rector, Senior Vice President Loan Officer, stating that the trust deed in question secured a loan in the amount of $113,000.00, which was made to the Creutzingers for them to purchase the subject property and that the funds were utilized solely as purchase money for the property.

The trial court denied Guffey's motion for summary judgment and granted the summary judgment motion of the bank and Winchester. Guffey has appealed and the only issue for review is whether the trial court erred in denying his motion for summary judgment and in granting the summary judgment motion of bank and Winchester.

A motion for summary judgment should be granted when the movant demonstrates that there are no genuine issues of material fact and that the moving party is entitled to a judgment as a matter of law. Tenn. R. Civ. P. 56.04. The party moving for summary judgment bears the burden of demonstrating that no genuine issue of material fact exists. Bain v. Wells, 936 S.W.2d 618, 622 (Tenn.1997). On a motion for summary judgment, the court must take the strongest legitimate view of the evidence in favor of the nonmoving party, allow all reasonable inferences in favor of that party, and discard all countervailing evidence. Id. In Byrd v. Hall, 847 S.W.2d 208 (Tenn.1993), our Supreme Court stated:

Once it is shown by the moving party that there is no genuine issue of material fact, the nonmoving party must then demonstrate, by affidavits or discovery materials, that there is a genuine, material fact dispute to warrant a trial. In this regard, Rule 56.05 provides that the nonmoving party cannot simply rely upon his pleadings but must set forth specific facts showing that there is a genuine issue of material fact for trial.

Id. at 211 (citations omitted) (emphasis in original).

Summary judgment is only appropriate when the facts and the legal conclusions drawn from the facts reasonably permit only one conclusion. Carvell v. Bottoms, 900 S.W.2d 23, 26 (Tenn.1995). Since only questions of law are involved, there is no presumption of correctness regarding a trial court's grant of summary judgment. Bain, 936 S.W.2d at 622. Therefore, our review of the trial court's grant of summary judgment is de novo on the record before this Court. Warren v. Estate of Kirk, 954 S.W.2d 722, 723 (Tenn.1997).

Tennessee Code Annotated § 66-24-119 (1993) states:

Judgments, attachments, orders, injunctions, and other writs affecting title, use or possession of real estate, issued by any court shall be effective against any person having, or later acquiring, an interest in such property who is not a party to the action wherein such judgment, attachment, order, injunction, or other writ is issued only after an appropriate copy or abstract, or a notice of lis pendens, is recorded in the register's office of the county wherein the property is situated....

Guffey asserts that by virtue of T.C.A. § 66-26-105 (1993) (first registered instrument has preference over later registered instrument) and the above statute, his judgment lien has priority over the bank's deed of trust. The Appellees, however, argue that due to the "oneness" of the transaction, the Creutzingers actually acquired encumbered title, and the judgment lien cannot attach ahead of the purchase money deed of trust.

The Appellees' argument is premised on the notion that purchase money instruments retain special priority rights. It has been widely held in jurisdictions throughout this country that:

A mortgage on land executed to secure the purchase money by a purchaser of the land contemporaneously with the acquisition of the legal title thereto, or afterward but as a part of the same transaction, is a purchase-money mortgage, and is entitled to a preference as such over all other claims or liens arising through the mortgagor, although they are prior in point of time.

55 Am.Jur.2d Mortgages § 325 (1996); see also 59 C.J.S. Mortgages § 215 (1998); Nelson & Whitman, Real Estate Finance Law § 9.1 (3d ed.1993). This rule applies regardless of whether the purchase money was advanced by the vendor or a third party lendor. See, e.g., 55 Am.Jur.2d Mortgages § 325; 59 C.J.S. Mortgages § 215; Nelson & Whitman, supra, at 801; Garrett Tire Ctr., Inc. v. Herbaugh, 294 Ark. 21, 740 S.W.2d 612, 613 (Ark.1987); Martin v. First Nat'l Bank of Opelika, 279 Ala. 303, 184 So.2d 815, 818 (Ala.1966); Slate v. Marion, 104 N.C.App. 132, 408 S.E.2d 189, 191 (N.C.App.1991); Aetna Cas. & Sur. Co. v. Valdosta Fed. Sav. & Loan Assoc., 175 Ga.App. 614, 333 S.E.2d 849, 852 (Ga.App.1985); Huntingburg Prod. Credit Assoc. v. Griese, 456 N.E.2d 448, 453 (Ind.App.1983); Sarmiento v. Stockton, Whatley, Davin & Co., 399 So.2d 1057, 1058 (Fla.App.1981).

Courts have espoused several different rationales to explain this special priority given to purchase money mortgages. One theory, sometimes referred to as the doctrine of instantaneous or transitory seisin, holds that title is conveyed to the grantee and then from the grantee to the purchase money mortgagee so quickly that no other interest has time to attach to it. See, e.g., Slate, 408 S.E.2d at 190-91; Nelson & Whitman, supra, at 803. Thus, under this theory, the grantee-mortgagor serves as a "mere conduit." Id. Perhaps this is somewhat of a legal fiction since it can be argued that some period of time elapses between the conveyance to the mortgagor and the execution of the mortgage. Nevertheless, many courts have loosely construed the time lapse, focusing instead on whether the actions were part of "one continuous transaction," so that the parties' intent would be promoted. See, e.g., Sunshine Bank of Fort Walton Beach v. Smith, 631 So.2d 965, 967 (Ala.1994) (citing 59 C.J.S. Mortgages § 231); Herbaugh, 740 S.W.2d at 613; Hursey v. Hursey, 284 S.C. 323, 326 S.E.2d 178, 180 (S.C.App.1985).

Another theory reasons that the only title that the purchaser receives is encumbered title. This theory gives a purchase money mortgage the same status as a retained vendor's lien. ² In other words:

[a] prior judgment lien cannot attach because the purchaser never obtains title to the land, but acquires only an equity interest subject to the payment of the purchase money.

Herbaugh, 740 S.W.2d at 613; see also Griese, 456 N.E.2d at 453.

Underlying the legalistic rationales for justifying the imposition of the rule is a more compelling public policy principle premised on a notion of intrinsic fairness. From a pragmatic standpoint, the property probably would never be sold to a vendee and the purchase money advanced for that purpose if the purchase money mortgagee anticipated that its interest would be inferior to that of another creditor. See Slate, 408 S.E.2d at 191. Furthermore, judgment lien creditors

have not extended their credit in reliance on the right to be repaid out of any specific property, much less out of property previously owned by another and coming to the debtor unpaid for, with the seller of it relying upon that very property she has parted with for her payment.

Nelson & Whitman, supra, at 805 (emphasis in original). Judgment lien creditors simply could not rely on the purchaser's acquisition of the property at issue, since their judgments were entered before the property was acquired. Id.

At least...