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Halliman v. Heritage Bank

Court of Appeals of Tennessee, Nashville

April 30, 2015


Session January 20, 2015.

Appeal from the Circuit Court for Montgomery County No. CT111370 Ross H. Hicks, Judge.

Justin Cole Sensing, Clarksville, Tennessee, for the appellants, Robert W. Halliman and Mal Son Halliman.

Joy Anne Boyd and Jonathan Cole, Nashville, Tennessee, for the appellees, Heritage Bank and Michael F. Stalls.

Frank G. Clement, Jr., P.J., M.S., delivered the opinion of the Court, in which Andy D. Bennett and Richard H. Dinkins, JJ., joined.



On December 1, 2006, David Reese Construction, LLC, ("DRC") a general contracting company that builds residential homes, entered into three construction loan agreements with Heritage Bank for the construction of three new homes in Riverbend Landing Subdivision in Clarksville. Each loan was evidenced by a promissory note and secured by a separate lot. The amount loaned for each was $164, 799 for Lot 101; $211, 200 for Lot 102; and $184, 000 for Lot 106.

Construction of homes on each lot was completed by mid-2007; however, DRC was unable to sell the homes and, as a result, failed to pay the notes when they first became due. The company entered into three separate Modification Agreements with Heritage Bank which extended the maturity dates on the foregoing notes to June 30, 2009.

When June 30 arrived, DRC was unable to satisfy any of its obligations, and the bank agreed to enter into another three Modification Agreements to extend the maturity dates to December 31, 2009. Also at this time, Robert Halliman, a managing member of DRC, [1] requested to obtain three new loans with which to construct three residential homes with committed buyers. Heritage Bank approved these loans on the condition that Mr. Halliman provide additional collateral in the form of a $30, 000 certificate of deposit and that he and his wife, Mal Son Halliman, execute a deed of trust pursuant to which their forty-acre tract of undeveloped land in Cumberland County was pledged as additional security for DRC, s obligations.[2] This deed of trust included a cross-collateralization clause permitting Heritage Bank to foreclose upon it should DRC default on any loan agreement it had with the bank. Mr. Halliman additionally executed a guaranty agreement with Heritage Bank, personally guaranteeing all of DRC, s present and future indebtedness including, specifically, the indebtedness on the first three construction loans.

When DRC did not satisfy its obligations on the three loans when they became due on December 31, 2009, Heritage Bank declared the notes to be in default and gave Mr. Halliman notice as the guarantor of all three notes. When Mr. Halliman did not cure the default, Heritage Bank initiated foreclosure proceedings on Lots 101, 102 and 106.

The lots were sold at three separate foreclosure proceedings and Heritage Bank purchased each of the properties. The foreclosure sale prices were as follows: $180, 000 for Lot 101; $150, 000 for Lot 102; and $185, 600 for Lot 106. Because the foreclosure sale prices did not fully satisfy the amounts due and owing on each note, Heritage Bank sought to satisfy the outstanding deficiency by foreclosing on the Hallimans' family owned forty-acre tract. In an effort to enjoin the initiation of foreclosure proceedings, Mr. Halliman, Mrs. Halliman, and DRC, (collectively "Plaintiffs"), filed suit against Heritage Bank and Michael Stalls, senior vice president of Heritage Bank, (collectively "Defendants"), seeking, inter alia, to invalidate the forty-acre deed of trust.[3] Heritage Bank filed an answer and additionally asserted breach of contract counterclaims based on Plaintiffs' collective default on the three construction loans in which it sought a deficiency judgment and costs of collection including attorneys' fees.

Trial took place on June 4, 2013. Plaintiffs argued that the deed of trust on the forty-acre tract was invalid and that Heritage Bank was not entitled to a deficiency judgment because the foreclosure sale prices of the properties were materially less than their fair market value. In support thereof, Plaintiffs relied on the testimony of Mr. Halliman that the fair market value of the three properties, calculated at $93 per square foot, was $643, 793.[4] Plaintiffs also introduced evidence to establish that Heritage Bank sold the properties within seven months of foreclosure for a total of $590, 300.

At the close of Plaintiffs' case-in-chief, Defendants moved to dismiss all of Plaintiffs' claims pursuant to Tenn. R. Civ. P. 41.02(2). The trial court granted the motion, finding that there was no proof that the deed of trust was void or otherwise unenforceable and that Plaintiffs failed to submit proof of the fair market value of the properties at the time of each foreclosure sale. Immediately thereafter, the bank put on proof in support of its counterclaims. Through Mr. Stalls' testimony, the bank introduced the notes, established that they were in default, and established the amount of the deficiency, including interest, all of which was unrebutted. At the close of proof, the trial court ruled that Heritage Bank was entitled to a deficiency judgment in the amount of $111, 115.66 plus its legal expenses. The court instructed Defendants to submit an affidavit and documentation supporting their request for attorneys' fees and expenses, and an order memorializing its findings.

Defendants filed a proposed order along with billing invoices and the affidavit of attorney Jonathan Cole which stated that Defendants incurred $93, 415 in legal fees and expenses. The trial court reviewed the invoices supporting Mr. Cole's figures in his affidavit and awarded Heritage Bank $55, 000 in attorneys' fees and expenses. This appeal followed.[5]

Plaintiffs present two issues for our review. One, they contend the trial court erred in granting Defendants' Tenn. R. Civ. P. 41.02(2) motion to dismiss. Two, they contend the court erred in awarding attorneys' fees in the amount of $55, 000. For its part, Heritage Bank contends the court ...

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