State ex rel. Slatery v. HRC Med. Ctrs., M2021-00488-COA-R3-CV

CourtCourt of Appeals of Tennessee
Writing for the CourtANDY D. BENNETT, JUDGE
PartiesSTATE OF TENNESSEE EX REL. HERBERT H. SLATERY, III, ATTORNEY GENERAL AND REPORTER v. HRC MEDICAL CENTERS, INC. ET AL.
Decision Date10 June 2022
Docket NumberM2021-00488-COA-R3-CV

STATE OF TENNESSEE EX REL. HERBERT H. SLATERY, III, ATTORNEY GENERAL AND REPORTER
v.

HRC MEDICAL CENTERS, INC.
ET AL.

No. M2021-00488-COA-R3-CV

Court of Appeals of Tennessee, Nashville

June 10, 2022


Session February 3, 2022

Appeal from the Circuit Court for Davidson County No. 12C4047 Don R. Ash, Senior Judge

The State appeals the trial court's holding that Tenn. Code Ann. § 66-8-101(1) applied to the State's attempt to have the Defendants' real estate sold in order to collect on its judgment, such that the statutory right of redemption could not be barred. Because we conclude that the sale sought by the State could proceed under subsection (2) of that statute, we vacate the court's order and remand for further proceedings.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated; Case Remanded

Herbert H. Slatery, III, Attorney General and Reporter, Andrée Blumstein, Solicitor General, and Jared Alan Hagler, Assistant Attorney General, for the appellant, State of Tennessee.

W. Kennerly Burger, Murfreesboro, Tennessee, and Steven Lee Lefkovitz, Nashville, Tennessee, for the appellees, Dan Hale, Dixie Hale, and Don Hale.

Andy D. Bennett, J., delivered the opinion of the Court, in which Frank G. Clement, Jr., P.J., M.S., and Arnold B. Goldin, J., joined.

OPINION

ANDY D. BENNETT, JUDGE

In this appeal, we construe the statutory right of redemption set forth in Tenn. Code Ann. § 66-8-101, and specifically whether that right could be curtailed in this case when the State sought an order of sale of real property to satisfy its money judgment. In 2017, the State of Tennessee prevailed in a Tennessee Consumer Protection Act action and was awarded a judgment of $18, 141, 750 against Dan Hale, Dixie Hale, and Don Hale ("Defendants"), who were held personally liable for engaging in fraudulent and deceptive

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practices in their operation of bio-identical hormone replacement therapy centers; the judgment was affirmed on appeal. See State ex rel. Slatery v. HRC Med. Ctrs, Inc., 603 S.W.3d 1 (Tenn. Ct. App. 2019). The State recorded the judgment in the counties where the Defendants owned real property, perfecting its judgment lien.[1] The State then moved for an order authorizing the sale of the Defendants' real properties in an attempt to satisfy the judgment. In an effort to maximize the value and purchase price of these properties, the State subsequently requested that the order of sale specifically confirm that no right of redemption existed, in accordance with Tenn. Code Ann. § 66-8-101(2). That statute reads:

Real estate sold for debt shall be redeemable at any time within two (2) years after such sale:

(1) Where it is sold under execution
(2) Where it is sold under any decree, judgment, or order of a court of chancery, whether founded upon a foreclosure of a mortgage, or deed of trust, or otherwise, unless, upon application of the complainant, the court orders that the property be sold on a credit of not less than six (6) months nor more than two (2) years; and that, upon confirmation thereof by the court, no right of redemption or repurchase shall exist in the debtor or the debtor's creditor, but that the title of the purchaser shall be absolute; and
(3) Where it is sold under a deed of trust or mortgage without a judicial sentence, unless the right of redemption is expressly waived by the deed or mortgage; and a waiver of the "equity of redemption," or a waiver using words of similar import, shall be sufficient to waive the right of redemption afforded by this section in all deeds of trust and mortgages, whether heretofore or hereafter existing

Tenn. Code Ann. § 66-8-101.

The circuit court concluded that the State was executing on a judgment and therefore Tenn. Code Ann. § 66-8-101(1), not subsection (2), applied; thus, the properties could be redeemed by the Defendants within two years of the sale. Accordingly, it denied the State's request to bar the right of redemption.

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The State appealed, and raises the following issue for our review:

Whether the trial court erred in concluding that a court-ordered sale of Defendants' real properties for payment toward the State's judgment lien was a sale "under execution," in accordance with Tenn. Code Ann. § 66-8-101(1), and in therefore denying the State's application for sale of the properties free of the statutory right of redemption.

STANDARD OF REVIEW

The construction of statutes and the application of the law to the facts present questions of law, which we review de novo with no presumption of correctness. Sallee v. Barrett, 171 S.W.3d 822, 825 (Tenn. 2005).

HISTORICAL PERSPECTIVE

In this case, we are examining the right of redemption set forth in Tenn. Code Ann. § 66-8-101, which is a "statutory right of redemption." Many of the cases interpreting this right also use the phrase "equity of redemption." The difference between the two concepts concerns when they are exercised:

Rights of redemption are basically of two types: those before the sale of property to satisfy a debt and those after. The two types are denominated according to their origins. The right to redeem before the sale is a creature of courts of equity, and is therefore referred to as the "equity of redemption." The right to redeem after the sale is created by statute and is referred to as the "statutory right of redemption."

Benjamin Pitts, Waiver of Redemption Rights in Tennessee Mortgages: Discarding the Contracts Clause & Common-Law Concepts, 55 Tenn. L. Rev. 733, 734 (1988) (emphasis added) (footnotes omitted). The Tennessee Supreme Court, in Swift v. Kirby, 737 S.W.2d 271 (Tenn. 1987), a case dealing primarily with subsection (3) of Tenn. Code Ann. § 66-8-101, found "that the phrase 'equity of redemption' by common usage, embraced the statutory right of redemption" and explained:

The "idea" that the phrase ["]equity of redemption["] represented, originated when mortgages were used as security instruments, prior to the advent of the deed of trust, and when courts of equity decided to relieve debtors of the harshness of the law of mortgages that vested full title in the mortgagor immediately upon default. The remedy provided by the courts allowed the debtor to redeem at any time between default and consummation of a foreclosure sale. All authorities agree that that right was the original meaning of the equity of redemption. However, with the advent of the right
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of redemption created by statute in the various states, the right of redemption continued to be referred to in many states, as in Tennessee, as the "equity of redemption."

Id. at 275, 276.

The statutory right of redemption, which is at issue in this case, "was created in the early 1800s to deal with the problem of inadequate sale price":

Legislation in various states gave mortgagors and/or judgment debtors the right to redeem property for a time after the sale by paying to the purchaser the purchase price plus interest and costs. This right of redemption put pressure on the bidders to bid the property's true value and prevented the mortgagee or judgment creditors, often the principal if not the only bidder, from obtaining the property for a nominal amount. The debt for which the property was sold was extinguished only to the extent of the proceeds from the sale. If the sale price was less than the amount of the debt and also less than the property's value, the debtor was still liable for the debt, and the debtor's only resource for paying the debt may have been taken in the sale. The statutory right of redemption allowed the debtor to repurchase the property if the sale price was inadequate. The debtor could then extinguish the debt with proceeds from either refinancing or resale at fair market value. In this manner, the statutory right of redemption, like the equity of redemption before it, helped ensure that satisfaction of debt and not the acquisition of property was the result of the transaction.

Pitts, 55 Tenn. L. Rev. at 735 (footnotes omitted). In 1820, Tennessee first enacted a statutory right of redemption. 1820 Tenn. Pub. Acts, ch. 11. The Tennessee Supreme Court acknowledged the purpose of such a right in Ewing v. Cook, 3 S.W. 507 (Tenn. 1887) when it observed, "The legislative purpose in securing both to the judgment debtor and his creditors a right of redemption was to make the land pay as large a part of the debts of the owner as possible." Id. at 510. In 1833, the Legislature enacted an exception to that right, which provided that the right of redemption "shall not exist" in cases "where land or interests in lands are directed to be sold by order of the court of chancery, founded upon a foreclosure of a mortgage, deeds of trust or any other case where the specific land to be sold is mentioned in the decree," provided that the complainant makes an application that the property "be sold on a credit of not more than two years nor less than six months" and that the sale is made by the master or commissioner and confirmed by the court, resulting in the purchaser's title being absolute. 1833 Tenn. Pub. Acts, ch. 47, sec. 2. With that historical perspective in mind, we turn to the merits of this appeal.

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ANALYSIS

The State was awarded a sizeable money judgment, which constitutes a debt, against the Defendants, and sought a sale of the Defendants' real property to satisfy that debt. Land is "only subject to redemption under our statute when sold for debt." White v. Bates, 15 S.W. 651, 652 (Tenn. 1891). Our task is to construe Tenn. Code Ann. § 66-8-101 to determine whether the State sought a sale "under execution," pursuant to subsection (1) of the statute, which would permit the Defendants to redeem the property, or whether it sought a sale pursuant to subsection (2) such that the right of redemption could be barred. The...

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