Swift v. Kirby

• Decision Date: 31 August 1987
• Citation: 737 S.W.2d 271
• Parties: John H. SWIFT, Appellee, v. Kenneth W. KIRBY, et ux., et al., Appellants.
• Court: Tennessee Supreme Court

Page 271

737 S.W.2d 271

John H. SWIFT, Appellee, v. Kenneth W. KIRBY, et ux., et al., Appellants.

Supreme Court of Tennessee,

at Nashville.

Aug. 31, 1987.

Fred E. Cowden, Jr., Nashville, for appellee.

H. Frederick Humbracht, Diane S. Kuhn, Dearborn & Ewing, Michael J. Philbin, Robert E. Kolarich, Adams, Taylor, Philbin, Pigue & Marchetti, Thomas V. White, John N. Popham, Tune, Entrekin & White, Nashville, for appellants.

Harris A. Gilbert, John W. Lewis, Gilbert & Milom, Nashville, for McAlister & Hart amicus curiae.

Lowe Watkins, Dan E. McGugin, Jr., Watkins, McGugin, McNeilly & Rowan, Nashville, for Com. Land amicus curiae.

Jack M. Tallent, II, Rebecca B. Murray, Kennerly, Montgomery & Finley, Knoxville, for Mid-South Title amicus curiae.

Richard Dance, Dance & Dance, Nashville, for First Tennessee Bank amicus curiae.

OPINION

FONES, Justice.

The primary issue in this case is whether the statutory right to redeem real property sold at foreclosure, granted by T.C.A. § 66-8-101 et seq., is waived by use of the phrase "equity of redemption."

Plaintiff, Swift, executed a deed of trust conveying real property to secure payment of a note to Commerce Union Bank in the sum of $10,000.00. He defaulted and the property was sold by the trustee on 1 July 1982 for $8,500.00, subject to a first mortgage. Defendants Mangum, Tanley, Tanley & Davenport (Mangum) were the purchasers at the foreclosure sale and they paid the first mortgage balance in the sum of $4,691.42 prior to selling the property to defendants Kirby et ux. for $44,800.00.

On 29 June 1984, Swift filed suit seeking to redeem the property in reliance upon T.C.A. § 66-8-101 et seq. He made no tender to Mangum, or the Kirbys prior to filing suit, but tendered into court the sum of $11,500.00 alleging it to be the $8,500.00 bid at foreclosure plus $3,000.00 interest. Swift alleged that chapter 774, Public Acts of 1984 providing that a waiver of the "equity of redemption" or words of similar import waived the statutory right of redemption, was unconstitutional and made the State Attorney General a party defendant. The Attorney General filed a notice of intent not to defend the constitutionality of the act.

Defendants answered that plaintiff had waived the statutory right of redemption by the language in the deed, denied that chapter 774, Acts of 1984 was unconstitutional and asserted that plaintiff had failed to tender in accord with the statute and was not entitled to redeem.

The trial judge held that plaintiff had not waived the statutory right of redemption, that chapter 774, Acts of 1984 was unconstitutional but that plaintiff had not complied with the tender requirements, and dismissed plaintiffs suit.

The Court of Appeals agreed with the trial judge on the issues of waiver and the unconstitutionality of chapter 774, but reversed on the tender issue. The Court of Appeals held that no subsequent purchaser to the purchaser at the foreclosure sale, except a creditor ¹ of the debtor, could demand more of a redeeming debtor than the amount bid at the foreclosure sale plus interest "increased by the amount of debt or debts cancelled by redeeming creditors", that the Kirbys were not in that class and that the tender of amount bid at foreclosure, plus interest, satisfied the requirements of the statute.

The provisions of the trust deed that defendants insist waived the statutory right of redemption reads as follows: "... free from equity of redemption, homestead, dower, and all other exemptions of every kind, which are hereby expressly waived; ...."

The issue may be narrowed to whether the phrase "equity of redemption" embraces the statutory right of redemption.

The Court of Appeals held that there was a fundamental distinction between equity of redemption and the statutory right of redemption in that equity of redemption refers to the right of the debtor "prior to foreclosure, to discharge the indebtedness and thus clear his property from the encumbrance of the mortgage", while statutory redemption is the right to redeem after foreclosure and sale. The authority cited for those definitions was 55 Am.Jur.2d Mortgages § 865 (1971).

Next, the Court of Appeals cited two Tennessee cases for the proposition that the right of a debtor to redeem his lands sold under execution is a legal right, not an equitable right. The cases cited are Ewing v. Cook, 85 Tenn. 332, 3 S.W. 507 (1887) and Reynolds v. Baker and Walker Bros., 46 Tenn. 221 (1869). Neither of these cases involved a question of waiver of a right of redemption, nor did either case define "equity of redemption."

In Ewing, the land of Wilson was sold at an execution sale to satisfy judgments against him. One of his judgment creditors, Caruthers, bought the property and took a sheriff's deed. Ewing was also a judgment creditor of Wilson. He exercised his right under the redemption statutes and redeemed Wilson's land from Caruthers. The day before that redemption, Ewing filed suit in the chancery court seeking a court sale of Wilson's right of redemption and application of the proceeds to the payment of his judgment. Wilson died testate and devised his interest in the land to Cook. Cook made a tender of redemption money to Ewing, as required by statute and within the two year period, but Ewing refused the tender because it did not include the full amount of the debt due him from Wilson. Under the statute, T.C.A. § 66-8-101 et seq., Ewing could have advanced the redemption bid to Caruthers, to include the whole debt, but he had failed to comply with the statute. Upon his refusal to agree to Cook's redemption, Cook filed suit, presumably a crossbill, to compel Ewing to submit to redemption. The first issue considered by the court was the validity of Ewing's contention that Wilson's equity of redemption should be sold to satisfy the entire debt that Wilson owed Ewing. The court said: "The right of a judgment debtor to redeem his lands sold under execution is not an equitable right at all. It is the creature of statute and depends on statute law, and in no sense [is it] a right either created or regulated by principles of equity." 85 Tenn. at 335, 3 S.W. 507. That is the portion of the opinion in Ewing relied upon by the Court of Appeals, but the Ewing court continued as follows:

Strictly speaking, there is no estate in the judgment debtor after sale and conveyance of his land under judgment sale. Nothing remains to the debtor, after execution sale, and Sheriff's deed, save a statutory right of redemption. This right of redemption has sometimes been spoken of as an equitable right, and his interest in the land subject to redemption as an equitable estate. This terminology springs from the supposed analogy between the statutory right of redemption and the equity of redemption of a mortgagor. But whatever may be the technical character of the interest springing from the right of redemption given to a judgment debtor whose lands have been sold under execution, it is not one which may be reached and subjected to sale by a creditor who is in condition to redeem as provided by statute.

Id. at 336, 3 S.W. 507.

The Ewing court recognized that the statutory right of redemption was sometimes spoken of as an equitable right, subject to redemption as an equitable estate. Its holding was simply that whatever the interest the debtor has under the statutory right of redemption, it is not "subject to sale by a creditor who is in condition to redeem as provided by statute." Id.

In Reynolds v. Baker and Walker Bros., supra, Reynolds' land was sold on 2 June 1860 after execution sale. He attempted to redeem the land at some undesignated date more than two years after the execution sale but before 12 February 1863, but Walker Brothers, the initial purchasers refused to allow the redemption. On 14 January 1865 Reynolds brought suit to enforce his right of redemption, asserting that a constitutional amendment and a legislative act had ordained that no statute of limitations would operate between 6 May 1861 and 1 January 1867 and that the time between those days would not be computed where real estate sold under execution, etc. was subject to redemption. This Court considered and decided two issues: (1) the law of redemption is not a statute of limitations and not subject to either the constitutional amendment or the legislative act; and (2) the legislative act was unconstitutional insofar as it sought to authorize the redemption of land that had been sold and whose two year redemption period had expired, before the passage of the act. In short, the attempted retrospective application would deprive the holder of the land of a vested interest. It was in the course of deciding the second issue that this Court made the pronouncement relied upon by the Court of Appeals, to-wit, that the right of the debtor to redeem is not an equity of redemption. That it was unnecessary to support the rationale used by the court to find that the legislative act was unconstitutional will be seen from the following quote:

The right of the debtor to redeem, is not an equity of redemption, in the sense of the law of mortgage. It is not an estate or interest in the land. The whole estate is vested in the purchaser by the sale. The right of the debtor is strictly a right to re-purchase, by payment or tender of the money within the prescribed time. If the money be paid or tendered within the time, the debtor has a right to re-conveyance of the land; and the purchaser is bound to make such re-conveyance. If the money be not paid or tendered, the right of the debtor is at an end and lost. The estate of the purchaser is absolute and indefeasible, and the debtor has no interest in it, or right with regard to it. So far as the debtor is concerned, the law is, after the lapse of two years, without offer to redeem, absolutely and exclusively the property of the purchaser, in as ample a manner as it is possible for the law to bestow and vest.

Id. ...