Smith v. Hughes
| Decision Date | 05 May 2021 |
| Docket Number | No. W2020-01228-COA-R3-CV,W2020-01228-COA-R3-CV |
| Citation | 639 S.W.3d 627 |
| Parties | Glenver Ian SMITH, et al. v. Stephen L. HUGHES, et al. |
| Court | Tennessee Court of Appeals |
John D. Horne, Memphis, Tennessee, for the appellants, Glenver Ian Smith, and April La'Vera Smith.
Richard Glassman and James F. Horner, Jr., Memphis, Tennessee, for the appellee, Stephen L. Hughes, Substitute Trustee.
Andrew B. Sanders and Lauren Paxton Roberts, Memphis, Tennessee, for the appellee, Farm Credit Mid-America, FLCA.
R. Porter Feild and Sarah E. Stuart, Memphis, Tennessee, for the appellees, William Vernon Powers, Deborah Lynn Powers, John W. Byrd, Trustee, and Bartlett Mortgage, Inc.
A. Blake Neill, Somerville, Tennessee, for the appellees, John E. Weston and Terry Hilliard.
Carma Dennis McGee, J., delivered the opinion of the court, in which J. Steven Stafford, P.J., W.S., and Kenny W. Armstrong, J., joined.
This case involves an action filed by heirs of a deceased debtor seeking to set aside a foreclosure sale and their claims for damages against multiple defendants involved with the sale. The trial court granted summary judgment to the substitute trustee who conducted the sale, granted motions to dismiss filed by five other defendants, and dismissed the two remaining defendants sua sponte. The plaintiffs appeal. We affirm and remand for further proceedings.
In 1983, Kathleen Jones Smith acquired title to approximately five acres of land pursuant to a deed from her mother, which was recorded in the Office of the Register of Deeds of Fayette County, Tennessee. In 2007, Kathleen Jones Smith executed a deed of trust pledging her interest in a two-acre portion of the property to secure a promissory note for a $116,000 loan from Farm Credit Mid-America, FLCA ("Farm Credit"). The deed of trust was also recorded in the Office of the Register of Deeds of Fayette County. The deed of trust identified the residential address of Kathleen Jones Smith as 13695 Highway 196, Eads, Tennessee, which was a residence located on the two-acre tract.
Kathleen Jones Smith died intestate on December 30, 2014. She was survived by her two children, Glenver and April Smith.1 No estate was opened for Kathleen Jones Smith after her death. However, Glenver resided at the aforementioned residence at the property after his mother's death and maintained access to her post office box. Neither Glenver nor April had any verbal, written, or electronic communication with Farm Credit regarding the death of their mother or their interest in the property, but Glenver and/or his father continued to make payments on the loan for the next several years.
In 2017, two affidavits of heirship were filed in the Fayette County Register's Office.2 According to Glenver and April, the affidavits of heirship were prepared by an attorney at the request of their father, but neither was aware of who actually recorded the documents. The affidavits of heirship began by stating that each affiant had known "Katherine J. Smith" for a number of years. Thereafter, the affidavits of heirship stated that "Kathleen J. Smith" had died and that she had only two children, Glenver and April, at the time of her death. The affidavits of heirship stated that they were executed "to help establish and reflect the heirship with respect to any real estate formerly owned by Kathleen J. Smith," including but not limited to the property at 13695 Highway 196 in Eads. The affidavits listed the address of Glenver as 13695 Highway 196, and they listed April's address at another location in Eads. However, when the documents were indexed, the Fayette County Register's Office only indexed the affidavits under the name of "Katherine J. Smith," which was the first way the name of the decedent was written in the affidavits.
In May 2019, Farm Credit filed an "Appointment of Substitute Trustee" in the Register's Office, appointing Stephen L. Hughes as substitute trustee under the deed of trust so that he could proceed with foreclosure, as the payments on the mortgage were 109 days in default. On May 22, Hughes sent a letter via U.S. Mail to Kathleen Jones Smith at her post office box, P.O. Box 97, stating that he had been engaged by Farm Credit to initiate foreclosure proceedings. The May 22 letter was not returned, and Hughes did not receive any response to the letter.
Hughes asked his law partner to perform a title search for the property at 13695 Highway 196 in the name of the Kathleen Jones Smith. After examining the records, the attorney issued a certificate of title certifying that marketable fee simple title to the property was vested in Kathleen Jones Smith. A commitment for title insurance was secured for the property as well.
On June 24, 2019, Hughes sent by certified mail a "Notice of Substitute Trustee's Sale of Real Estate" to Kathleen Jones Smith both at the property address, 13695 Highway 196, and also to the post office box address. Both envelopes were eventually returned with a notation of "unclaimed" and "unable to forward." On three dates in June and July, Hughes caused the Notice to be published in the Fayette Falcon newspaper, announcing that the deed of trust executed by Kathleen Jones Smith was in default and that the foreclosure sale would occur on July 17. In the space for other "interested parties," the Notice listed "None."
Hughes conducted the foreclosure sale on July 17 as scheduled, and the property was sold to John Weston and Terry Hilliard for $45,901. The balance owed on the Farm Credit note was approximately $44,400. A substitute trustee's deed was executed and recorded, conveying the property to Mr. Weston and Mr. Hilliard. On August 30, 2019, Mr. Weston and Mr. Hilliard sold the property for $145,000 to Mr. and Mrs. William Vernon Powers. Mr. and Mrs. Powers executed a deed of trust in favor of their lender, Bartlett Mortgage, Inc., with John W. Byrd serving as trustee.
On October 25, 2019, Glenver and April Smith ("Plaintiffs") filed a complaint to set aside the foreclosure sale, to void the subsequent deeds to the real property, for damages to real and personal property, and for fraud, willful and/or negligent misrepresentation, and conversion. They named as defendants Hughes, Farm Credit, Mr. Weston, Mr. Hilliard, Mr. and Mrs. Powers, Mr. Byrd, and Bartlett Mortgage. Plaintiffs alleged that they had no prior knowledge of the foreclosure sale. Plaintiffs asserted that the aforementioned affidavits of heirship had "confirmed in the public record" the addresses of the heirs of Kathleen Jones Smith. Thus, Plaintiffs alleged that Hughes and Farm Credit "knew or should have known" their addresses and "knew or should have known" that they were "interested parties" with regard to the foreclosure sale. They alleged that Hughes and Farm Credit were obligated to list their names as "interested parties" in the advertisement of the foreclosure sale pursuant to Tennessee Code Annotated section 35-5-104. Instead, Plaintiffs alleged, Hughes and Farm Credit "intentionally, or negligently, made the false representation" in the advertised notice that there were no interested parties. Plaintiffs asserted that the failure to list them as "interested parties" in the advertisement or otherwise provide them with notice rendered the foreclosure sale "void as a matter of law." Plaintiffs alleged that Hughes and Farm Credit had a duty to provide them with "actual notice" that they intended to extinguish Plaintiffs’ interest in the property through foreclosure. They claimed that the fair market value of the property was at least $145,000 and that it was sold for only $45,901, a "grossly inequitable price." Plaintiffs asserted that if the wrongful foreclosure was not set aside, they would sustain damages of $101,399.3
The complaint did not set forth separate counts against each defendant or separately analyze the elements of any causes of action. After the facts section, the complaint simply listed "claims for relief," in which Plaintiffs sought an order setting aside the foreclosure sale as void, declaring the subsequent deeds void, and awarding Plaintiffs monetary damages for wrongful foreclosure and other claims. The request for damages was limited to defendants Hughes, Farm Credit, Mr. Weston, and Mr. Hilliard.
All of the defendants filed answers and/or motions to dismiss, and discovery ensued. Farm Credit filed a motion to stay discovery on January 9, 2020, asserting that Plaintiffs had propounded discovery to Farm Credit and that the trial court should stay further discovery until the court resolved its motion to dismiss for failure to state a claim. Farm Credit asserted that requiring it to respond to the discovery would waste time and resources if the complaint was invalid and subject to dismissal. In response, Plaintiffs filed a motion to compel Farm Credit to respond to their interrogatories and requests for production of documents. Plaintiffs argued that the hearing on the motion to dismiss for failure to state a claim should be stayed until Farm Credit responded to discovery.
Hughes filed a motion for summary judgment, asserting that he had complied with all statutory notice and publication requirements and did not breach any duty to Plaintiffs. Hughes argued that even if Plaintiffs would have otherwise been entitled to notice of the sale, he did not have any actual or record notice of their interests in this case. Hughes supported his motion with his own affidavit, which stated that he was unaware that Kathleen Jones Smith was deceased. He described sending the May 22 letter to the post office box for Kathleen Jones Smith, which was not returned, and receiving no response. He stated that he secured a title search from a partner at his firm along with a certificate of title for the property. Hughes stated that the affidavits of heirship referenced in Plaintiffs’...
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