Session August 27, 2014
Appeal from the Chancery Court for Sullivan County (Kingsport) No. K0034810(M) John S. McLellan, III, Chancellor
Christopher D. Owens, Johnson City, Tennessee, for the quasi-parties/appellants, David L. Rose and J. Rickey Davis.
Thomas H. Torbett and Thomas A. Peters, Kingsport, Tennessee, and Ronald W. Woods and Brandy M. Burnette, Greeneville, Tennessee, for the appellees, Sandra Lynn Hobbs and Lisa Hobbs Nottingham.
JOHN W. MCCLARTY, J., delivered the opinion of the Court, in which CHARLES D. SUSANO, JR., C.J., and D. MICHAEL SWINEY, J., joined.
JOHN W. McCLARTY, JUDGE
The appellants in this action, David L. Rose and J. Rickey Davis, are quasi-parties in a partition action among the heirs of Herbert Hoover Hobbs, who died intestate in 1998. In filing the partition action in 2006, Sandra Hobbs, Mr. Hobbs's daughter, asked the trial court to sell the properties held by her father at his death. The defendants were the other heirs of Mr. Hobbs: Lisa Hobbs Nottingham (another daughter), and Gwendolyn B. Hobbs (widow) (along with Sandra Hobbs, collectively "the Hobbses"). When the Hobbses were unable to agree on how to divide the estate, the trial court ordered the sale of the real property and appointed Sara Housewright (the Clerk and Master at that time) to serve as "Special Commissioner" to conduct the sale with the assistance of auctioneers.
Several auctions of the estate property eventually were conducted in September 2009, including the Country Joy Apartments ("the Apartments") and the Country Joy Mobile Home Park ("the Park"). On September 18, 2009, Rose and Davis were the high bidders for the Apartments, "493 Barnett Dr., Kingsport, TN." The auction announcement released by Ron Ramsey & Associates, inter alia, provided that "[t]he seller will furnish a warranty deed to the property, free and clear of any liens. . . ." The "terms" set out in the sales contract called for cash payment, with a 10 percent deposit, the balance due "at closing in approx. 30 days" with the sale "subject to terms in announcement and court approval." The contract further provided that if "purchasers fail to carry out and perform the terms of this agreement after deed is presented, then the above deposit money shall be forfeited as a damage to this sale . . . ."
The Park, located at "483 Barnett Dr., Kingsport, " was also auctioned on September 18, 2009. Initially, Kimberly Mason (through Kimberly Cantrell Investments, Inc.) was the high bidder on that parcel. On the day of the auction, she signed an identically worded contract to the one signed by Rose and Davis.
According to Rose and Davis, it had been represented to them at the auction that the Apartments and the Park were each separate parcels of land. They contacted Tom Peters, co-counsel for one of the Hobbses, to ask further questions. It appears that because the Apartments and the Park were on a single, undivided, unpartitioned parcel, Mr. Peters purportedly advised them that it would be easier if they upped their bid on the Park and purchased it as well. Rose understood that purchasing the Park "may eliminate a lot of issues." The bid on the Park was raised by Rose and Davis on September 28, 2009, and ultimately they became the high bidder for it. They signed a sales contract for the Park on October 23, 2009. Earnest money in the amount of $12, 375 was paid for the Park and $31, 500 was paid for the Apartments.
In October 2009, Rose and Davis initiated efforts to obtain financing from BB&T. Rose's deposition testimony, used at trial for impeachment purposes, was that his lender wanted a survey completed and that he spoke with surveyor John Mize before he signed the contract for the Park on October 23, 2009. During the following week, he took Mr. Mize to see the property. Around this time, the Special Commissioner filed her report detailing the sales from the September auctions. The trial court confirmed the sales through an order effective December 16, 2009 (entered nunc pro tunc on January 4, 2010). According to Rose and Davis, they were not given notice of the confirmation hearing.
According to Rose and Davis, it was not until around March or April 2010, when they received the survey from Mr. Mize, that they finally understood the Park and the Apartments were not two separate parcels but rather the single, undivided parcel. Furthermore, the initial survey revealed that the driveway leading across the Park to the Apartments apparently encroached on other property retained by the Hobbs estate. According to Rose, he advised the Special Commissioner, while Davis advised Mr. Peters regarding these issues. Thereafter, a revised survey was prepared that showed the property just purchased included the 14-foot parcel on which the driveway purportedly encroached. The survey and the legal description of the Apartments and the Park was in essence the same survey and legal description found in Tax Map 091, Parcel 103.00.
Tentative closing dates of April 22, 2010, and June 22, 2010, were set, but Rose and Davis never closed on their purchases. Motions for issuance of show cause orders were filed in August 2010. By the time the motions were heard the following month, nearly one year had transpired since the auctions. At the September 2010 hearing, Davis appeared with counsel and indicated he could close on the purchases in two weeks. He notified the court that he had "bought out" the interests of Rose. However, during the hearing, Davis did not inform the court regarding the issues he purportedly raised with Mr. Peters before signing the sales contract for the Park. Nor did he apprise the court of any concerns and/or ask the court for relief. Instead, he signed amended sales contracts – identical to the previous contracts except Rose was not a signatory – on September 20, 2010, for both the Apartments and the Park. Shortly thereafter, Davis initiated efforts with Tri-Summit Bank to obtain financing as the sole purchaser for the properties.
According to Davis, shortly after signing the amended contracts, he learned the underwriting guidelines had changed and that a ten percent deposit was no longer sufficient; rather, lenders were requiring a twenty percent deposit. Moreover, Davis was displeased with the fact that one lender would have required him to provide collateral in the form of other real property, in addition to the Apartments and the Park themselves, in order to secure the loan. Davis admits he lost interest in purchasing the properties at this point.
In January 2011, another motion for issuance of a show cause order was filed by the Hobbses. The motion was heard on February 18, 2011, but neither Rose nor Davis appeared. The court thereafter issued show cause orders requiring the pair to appear on February 28, 2011. Rose and Davis further were directed to advise the court by March 18, 2011, whether they were willing to close on the properties.
On April 7, 2011, over 18 months after the date Rose and Davis executed the first sales contract, they moved to set aside the contracts on the Apartments and the Park. In the motion, they noted inter alia:
Rose and Davis later learned that the property was a single tract and that they would have to acquire a right-of-way across 483 Barnett Drive to access 493 Barnett Drive;
To avoid potential litigation and/or planning commission problems in that regard, Rose and Davis signed a contract on 483 Barnett Drive . . .;
At the time the contracts were signed the property was the subject of a large federal tax lien;
The tax lien was not paid until February 18, 2010 . . .;
Upon information and belief, the tax lien was not released until the spring of 2011;
Thus, the property was not free and clear of liens for nearly 18 months after the contracts were signed, a material breach of the express terms of the contracts;
On December 31, 2009, an Order of Confirmation of sales went into effect:
Upon information and belief, neither Rose nor Davis were given notice of the hearing on the Order of Confirmation;
On September 20, 2010, an Amended Sales Contract was signed by Davis . . . and approved by the Clerk and Master . . .;
This sale has not been approved by any subsequent Order of Confirmation, which is, respectfully, required . . . and because no notice of the hearing was provided [previously] calls into question whether any of the contracts are subject to the Order of Confirmation;
In addition, Davis'[s] inquiries as to financing have met resistance due to no fault of his own . . .;
In any event, a closing on the property at issue was impossible prior to the removal of the tax lien, which was no fault of either Rose or Davis, and the passage of time since the contracts were signed is so significant that the circumstances regarding the condition of the property and the conditions of financing are such that Rose and Davis should be relieved of any obligation to purchase the property and their earnest money returned;
(Numbering in original omitted.). The pair later supplemented their motion to set aside the sales contract inter alia as follows:
The "contract[s]" for the sales of "483" and "493 Barnett Drive" are unenforceable, void and/or voidable pursuant to T.C.A. 29-2-101;
The "contract[s]" for the sales of "483" and 493 Barnett Drive" are unenforceable and void due to the insufficiency of a description of what was "sold, " Baliles v. Cities Serv. Co., 578 S.W.2d 621 ...