Minton v Long, 98-00491
| Decision Date | 17 December 1999 |
| Docket Number | 98-00491 |
| Citation | 19 S.W.3d 231 |
| Parties | RICHARD D. MINTON and KATHLEEN MINTON, Plaintiffs/Appellees v. WILLIAM R. LONG, et al, Defendants/Appellants. AppealCOURT OF APPEALS OF TENNESSEE Filed |
| Court | Tennessee Court of Appeals |
APPEAL FROM THE DAVIDSON COUNTY CHANCERY COURT AT NASHVILLE, TENNESSEE
Davidson Chancery No. 97-1985-III
THE HONORABLE ELLEN HOBBS LYLE, CHANCELLOR
This case involves a parking easement over and upon a piece of commercial property located in Nashville. The property with the easement, the servient estate, was the subject of a mortgage foreclosure sale. We primarily consider two issues here: first, whether the easement continued to exist after the foreclosure and, second, whether the post-foreclosure purchasers of the servient estate are now estopped by deed from asserting that the foreclosure extinguished the easement.
The trial court granted summary judgment to the owners of the property which benefits from the easement, the dominant estate owners, holding as a matter of law that the foreclosure sale did not extinguish the parking easement. The court also held that since the trustee's deed, subsequent to foreclosure, recognized the existence of the parking easement as did the post-foreclosure deeds of all subsequent grantees of the servient estate, the defendant and present owner of the servient estate was estopped by deed to deny the continued existence of the easement. We reverse the trial court's grant of summary judgment as we find that the foreclosure sale did terminate the Parking and Access Easement. Furthermore, we find that this case must be remanded for a determination of the factual issues including the issue of what intent was evinced by the transfer of the deed of the servient estate subject to the easement.
C. BENNETT HARRISON, JR., Cornelius & Collins, Nashville City Center, Suite 2700, 511 Union Street, P. O. Box 190695, Nashville, Tennessee 37219
ATTORNEY FOR PLAINTIFFS/APPELLEES
WINSTON S. EVANS, Evans, Jones & Reynolds, 1810 First Union Tower, 150 Fourth Avenue, North, Nashville, Tennessee 37219-2424
ATTORNEY FOR DEFENDANTS/APPELLANTS
REVERSED AND REMANDED
Prior to October 8, 1984, both pieces of adjacent property involved in this case, a dominant and a servient tract of land, were owned by Tropics Properties, a Tennessee general partnership. On October 8, 1984, Tropics Properties sold what was to become the servient estate to Lon F. Raby, Trustee. Contemporaneous with this sale, Raby granted a written and recorded Parking and Access Easement to Tropics Properties. By this instrument, Raby granted to Tropics Properties a nonexclusive easement for parking and access on the property contemporaneously transferred to him by Tropics Properties, said easement being in favor of the adjacent properties still retained by Tropics Properties and upon which it was then operating the Steeple Chase restaurant. This Parking and Access Easement contained the following provision:
All parking and access rights granted by this instrument shall at all times and at any given time be subordinate to any existing first mortgage(s) on either or both properties affected h[e]reby, whether such mortgage(s) now exist or may be hereafter imposed; and such subordination shall occur and be operative and effective by the fact of the existence of such mortgage(s) of public record, it being the intent hereof that no subordination agreement or acknowledgment of subordinate status shall be necessary in order to effect such subordinate status, and that the release and satisfaction of a first mortgage or first mortgages, followed at any interval by the creation of a new first mortgage or first mortgages shall automatically confer priority on the new mortgage(s).
On February 28, 1985, Lon F. Raby, Trustee, executed a deed of trust in favor of Third National Bank conveying the servient estate in trust to J. M. Grissim, Trustee, to secure a promissory note in the amount of $3,750,000.00. This trust deed provided in part that "[b]orrower covenants that borrower is lawfully seized of said property and that the same is free and clear of all taxes, liens and encumbrances whatsoever, except as set out in Exhibit "B" attached hereto and incorporated herein by reference." Exhibit "B" provides in pertinent part as follows:
Raby defaulted and Third National Bank foreclosed on the servient estate. At the October 5, 1990 foreclosure sale, Third National Bank was the highest bidder at $2,949,263.00. On that same date, W. Fred Williams, Successor Trustee, conveyed to Third National Bank by deed the servient estate and other property encumbered by the trust deed. The deed from the trustee to the bank provided that the sale was subject to certain easements, restrictions, and liens, including the following:
On September 18, 1991, the Steeple Chase restaurant having closed, Tropics Properties leased the dominant estate to plaintiffs in this action, Richard and Kathleen Minton, who operated thereon Illusions Salon and Day Spa, a beauty and health care salon. This lease agreement specifically provided that the leased premises included parking rights as set forth in the Parking and Access Easement previously executed by Raby, Trustee, on October 8, 1984. This lease also gave the Mintons the option to purchase the dominant estate upon certain terms and conditions.
On June 22, 1993, Third National Bank sold the servient estate to Belle Meade Galleria I, a limited partnership. The deed of conveyance from Third National Bank to Belle Meade Galleria I was made subject to the Parking and Access Easement favoring the dominant estate.
On January 27, 1994, the Mintons exercised their option and purchased the dominant estate from Tropics Properties by deed specifically providing that the conveyance was made: "Together with and subject to all of grantors rights in and to the nonexclusive parking and access easement of record in book 6399, page 533, said Register's Office, subject to the terms and conditions therein, including but not limited to automatic subordination of rights to any recorded first mortgage(s)."
By deed dated September 30, 1996, Belle Meade Galleria I sold the servient estate, by special warranty deed, to the defendant in this case, William R. Long "subject to the following: ...6. Parking and access easement of record in book 6399, page 533, said Register's Office." On or about October 22, 1996, Long caused to be constructed a fence between the dominant and servient estates effectively preventing the Mintons from exercising any rights under the Parking and Access Easement. On June 13, 1997, the Mintons filed suit against Long seeking a declaration by the court of the validity of the Parking and Access Easement and a mandatory injunction for removal of the fence.
On August 25, 1997, Belle Meade Galleria I, by special warranty deed of correction, reconveyed the servient estate to Long, deleting any reference to the Parking and Access Easement in favor of the Minton property. On September 2, 1997, Long answered the complaint and by counter-claim joined W. Fred Williams, Trustee and SunTrust Bank of Tennessee as successor by merger of Third National Bank, seeking to quiet title to the servient estate and reform all deeds in Long's chain of title so as to delete all exceptions and reservations concerning the Parking and Access Easement.
The trial court granted summary judgment to plaintiffs holding that the Parking and Access Easement survived the foreclosure sale of the servient estate and further that the defendants were estopped by deed to deny the continued existence of the Parking and Access Easement, the trial court granted summary judgment to plaintiffs. The trial court further sua sponte dismissed the counter claim of Long against the Mintons, the bank and the trustee seeking to reform the deeds in the chain of title to the servient estate.
In his first issue, Long challenges the trial court's holding that the Parking and Access Easement survived the foreclosure sale. There is little doubt that in cases where a properly recorded deed of trust predates the establishment of an easement or encumbrance, foreclosure and sale under the deed of trust terminates such easement or encumbrance. In Parker, Flenniken & Claiborne v. Thacker, 15 Tenn. App. 553 (1932), it was held that foreclosure and sale of a first mortgage effectively cut off a subsequent mortgage and the purchaser of the property at foreclosure sale took it free and clear of the encumbrance of a second mortgage. In the same context this court has held that "[i]t is in the nature of the infirmity of a junior mortgage or lien that it may be extinguished in the enforcement of a superior mortgage or lien." Third Nat'l Bank v. McCord, 688 S.W.2d 446, 450 (Tenn. App. 1985).
That the same rule applies when the post-mortgage encumbrance is an easement appears to be settled.
The only dispute in this case is over the easement granted [the defendant] over the second tract. The Government correctly states that the issue before the Court is whether an easement created over lands subject to a mortgage has priority or survives the foreclosure of the mortgage by the mortgagee. The government cites Kling v. Ghilarducci, 3 Ill.2d 454, 121 N.E.2d 752 (1954) for the proposition that an easement created subsequent to the execution of a mortgage is eliminated by foreclosure of the mortgage.
The holding in Kling was cited with approval in Bush v. Duff, 754 P.2d 159 (Wyo. 1988). The Bush court faced a similar situation involving the granting of a mortgage followed by the establishment of a way of necessity over a servient estate previously mortgaged. Even though the court recognized...
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