Session June 22, 2016
from the Chancery Court for Campbell County No.
7CH1-2015-CV-15 Elizabeth C. Asbury, Chancellor
case involves a residential development on Norris Lake in
Campbell County called The Willows at Twin Cove Marina. The
Declaration of Covenants, Conditions and Restrictions for the
development grants certain rights to the individual/entity
described in the document as the "Declarant." As
pertinent to this case, those rights include an exemption
from payment of maintenance assessments to the
homeowner's association under certain circumstances. The
original owner of the development defaulted on construction
loans, resulting in a foreclosure sale of certain portions of
the development property and the personal property of the
original owner. Civis Bank, the successor owner of the
property sold at foreclosure, brought this action asking the
trial court to declare it to be the "Declarant, "
and thereby exempted from assessments levied by the defendant
homeowner's association. Both sides moved for summary
judgment. The trial court held that Civis did not meet the
applicable definition of "Declarant" in the
Declaration. We agree. Accordingly, we affirm the court's
grant of summary judgment to the homeowners' association.
R. App. P. 3 Appeal as of Right; Judgment of the Chancery
Court Affirmed; Case Remanded
S. Ritchie and Rachel King Powell, Knoxville, Tennessee, for
appellant, Civis Bank.
N. Winchester and Joshua R. Holden, Knoxville, Tennessee, for
appellee, The Wilows at Twin Cove Marina Condominium and Home
Owners Association, Inc.
Charles D. Susano, Jr., J., delivered the opinion of the
court, in which D. Michael Swiney, C.J., and John W.
McClarty, J., joined.
CHARLES D. SUSANO, JR., JUDGE.
2004, Twin Cove Acquisition Company, Inc. (TCAC) began
development of "The Willows at Twin Cove Marina, "
consisting of certain non-contiguous tracts of real property
on Norris Lake. The development included a marina, a
residential subdivision, condominiums, a swimming pool, and a
clubhouse. TCAC obtained financing from Civis Bank,
among other lenders. In 2004, TCAC executed a deed of trust
and security agreement granting Civis a security interest in
all of its real and personal property interests in the
21, 2005, TCAC executed a "master deed and declaration
of condominium regime for The Willows at Twin Cove
Marina" (the Willows Master Deed). TCAC recorded the
Willows Master Deed the following day. It defines TCAC as the
"Condominium Project Developer" and the
"Declarant." It also establishes "The Willows
at Twin Cove Marina Condominium and Home Owners Association,
Inc., " (the HOA), consisting of the owners of a unit or
units within the condominium project. The Willows Master Deed
authorizes the Board of Directors of the HOA to collect
maintenance assessments. It provides that the
"Condominium Project Developer shall not owe any
maintenance fund assessments on any Unit that it is
constructing, rehabilitating or restoring until a certificate
of occupancy is available on that Unit." Shortly
thereafter, TCAC executed a second deed of trust and security
agreement in favor of Civis on June 27, 2005.
February 13, 2007, Civis assigned the 2004 and 2005 deeds of
trust and security agreements to BankEast. The same day,
Civis purchased a 26.62% participation interest in a new loan
from BankEast to TCAC. In connection with the new loan, TCAC
executed an amended and restated deed of trust, security
agreement, and assignment of rents and leases in favor of
BankEast, which grants BankEast the following:
all of the real property, interests in real property,
estates, easements, rights, improvements, fixtures and
appurtenances thereunto . . . TOGETHER with all personal
property . . . of every kind and nature whatsoever, now or
hereafter located in, upon or under the Property or any part
thereof and used or usable in connection with any present or
future operation of the Property and now owned or hereafter
acquired by [TCAC] . . . TOGETHER with all interest, estate
or other claims, both in law and in equity, which [TCAC] now
has or may hereafter acquire in the Property.
(Capitalization in original.) The real property of the
development consisted of eight separate tracts, designated
Tracts 1 through 8, all of which were encumbered by the 2007
deed of trust and security agreement.
August 25, 2008, TCAC recorded a Declaration of Covenants,
Conditions and Restrictions for the Willows at Twin Cove
Marina (the Declaration of CCR). It contains the provision at
the heart of the dispute between the parties, i.e.,
the definition of the term "Declarant":
"Declarant": Shall mean TWIN COVE ACQUISITION
COMPANY, INC., the owner of the Properties submitted hereto,
together with any successor in title who comes to stand in
the relation to the Community as his predecessor.
Notwithstanding the foregoing, the phrase "Owner"
as referred to in this definition shall not include in its
capacity as such any Mortgagee except for such Mortgagee who
acquires said Declarant's entire interest with respect to
the Properties . . . at the time of such acquisition pursuant
to Foreclosure of a Mortgage encumbering said Declarant's
interest in the Properties . . . and who then expressly
assumes the position of Declarant.
(Capitalization in original.) Among the rights provided to
the Declarant in the Declaration of CCR is an exemption from
paying maintenance fund assessments under certain conditions:
Declarant shall not be responsible or liable for the payment
of assessments (whether General, Parcel, Special or Specific)
in respect to Lots for which Declarant holds record title and
which do not contain occupied Residential Units (except as
hereinafter provided); provided that Declarant covenants and
agrees to pay assessments in the same manner as Lots conveyed
to Owners for each Lot owned by Declarant containing an
occupied Residential Unit.
eventually defaulted on its loan obligations to BankEast. It
is undisputed that by the time of the default, BankEast had
released certain tracts of real estate from the deeds of
trust, including a portion of Tract 2, all of Tract 3, and
other units in the condominiums and single family lots.
BankEast foreclosed on the remaining collateral on January
13, 2012. At the foreclosure sale, BankEast was the high
bidder, and became the owner via conveyance by Substitute
Trustee's Deed executed on January 13, 2012, which
conveys "the Property, . . . together with all of the
hereditaments, improvements, buildings, easements and
appurtenances thereon and thereunto belonging[.]" At the
foreclosure sale, the Substitute Trustee also announced the
sale of TCAC's personal property encumbered by the deeds
of trust. BankEast also purchased the personal property, as
reflected by a bill of sale executed by the substitute
trustee, which states in pertinent part:
Substitute Trustee, ("Seller") . . . does hereby
grant, sell, transfer, and deliver unto BankEast, a Tennessee
banking corporation, ("Buyer") the following:
* * *
All of [TCAC's] right, title and interest in . . . all of
[TCAC's] accounts, contract rights, accounts receivable,
inventory, leases, income, intangibles and rights to income
with regard to the Premises, the improvements thereon and the
Collateral, now owned or hereafter acquired and now due or
which hereafter may become due, including all contract rights
and general intangibles with regard to the operation of the
project to be constructed on the Premises, specifically
including, without limitation, all rights, title and interest
of [TCAC] in, to and under all operating, management and
maintenance agreements relating, directly or indirectly, to
the aforesaid project and the Premises[.]
after the foreclosure sale, on January 27, 2012, the
Tennessee Department of Financial Institutions closed
BankEast and appointed the Federal Deposit Insurance
Corporation (FDIC) as receiver. According to the affidavit of
Ben Lindley, president and CEO of Civis, "[t]he FDIC, as
Receiver, sold substantially all of the assets of BankEast to
U.S. Bank, . . . including the [f]oreclosed [p]roperty."
There is no other documentation in the record regarding the
sale from the FDIC to U.S. Bank, so it is unclear what
"substantially all of the assets of BankEast"
specifically included under the terms of the sale.
February 1, 2012, the HOA began assessing homeowners'
on the property lots owned by U.S. Bank in the total amount
of $1, 350 per month. The assessments were for ten lots
located on Tracts 2, 4, 6, 7, and 8. On March 21, 2013, the
HOA filed a notice of lien for the assessments, claiming that
the HOA had a lien for the unpaid and delinquent assessments.
March 28, 2013, Civis purchased all of U.S. Bank's
interest in the foreclosed property, as reflected in a note
purchase and sale agreement, special warranty deed conveying
the real property "with the appurtenances, estate, title
and interest thereto, " and bill of sale documenting the
transfer of "all right, ...