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J. P. Morgan Chase Bank, N.A. v. Finley

Court of Appeals of Tennessee, Nashville

June 22, 2017

J. P. MORGAN CHASE BANK, N.A.
v.
GARY ELDON FINLEY, ET AL.

          May 23, 2017 Session

         Appeal from the Chancery Court for Marshall County No. 15370 J. B. Cox, Chancellor

         A bank filed a complaint to reform a Deed of Trust to correct a scrivener's error in the legal description of a parcel of property in order to foreclose on the property. While the litigation was pending, the mortgagors conveyed title to the property to a third party, who claimed to be a bona fide purchaser for value without notice. The trial court concluded that the third party did not qualify as a bona fide purchaser because he was aware of the bank's litigation when he obtained title to the property. We affirm the trial court's judgment.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed

          Robert Allen Dalton, Jr., Lewisburg, Tennessee, for the appellant, Gary Eldon Finley.

          Janet Strevel Hayes, Knoxville, Tennessee, and Mary Elizabeth Haltom White, Nashville, Tennessee, for the appellee, J.P. Morgan Chase Bank, N.A.

          Andy D. Bennett, J., delivered the opinion of the Court, in which Frank G. Clement, Jr., P.J., M.S., and W. Neal McBrayer, J., joined.

          OPINION

          ANDY D. BENNETT, JUDGE

         I. Factual and Procedural Background

         This case concerns real property in Lewisburg, Tennessee. In April 2005, Robin and Kerry Weaver purchased a house located at 2070 Wild Cherry Drive, also known as Lot 26 of the Duncanwood Estates Subdivision, from Dean Baxter. The Weavers also obtained Lots 24 and 25, which were neighboring unimproved lots, from Mr. Baxter. The Weavers conveyed Lots 24 and 25 back to Mr. Baxter at the end of 2005. They obtained a mortgage from National Mortgage Network ("National Mortgage") in January 2006 and transferred a Deed of Trust to National Mortgage as security for the loan. A scrivener's error was made in the legal description of the property attached to the Deed of Trust. The legal description referenced Lots 24 and 25 rather than Lot 26, which was the parcel all the parties intended to be the security for the loan. The Derivation Clause of the Deed of Trust, however, correctly identified the encumbered property as 2070 Wild Cherry Drive, Lewisburg, Tennessee.

         National Mortgage sold the Weavers' loan in the normal course, and J. P. Morgan Chase Bank, N.A. ("Chase") became the successor mortgagee some time later. Chase did not discover the scrivener's error in the Deed of Trust until the Weavers defaulted on their loan and Chase sought to initiate foreclosure proceedings. When Chase discovered the error in the legal description, it filed a complaint to reform the Deed of Trust.

         While Chase's case against the Weavers was pending, the Weavers conveyed Lot 26 to Gary Eldon Finley by quitclaim deed. Chase amended its complaint to add Mr. Finley as a party defendant once it became aware of the transfer. In addition to seeking reformation of the Deed of Trust in its amended complaint, Chase asserted that the purported conveyance to Mr. Finley should be set aside because it was a fraudulent conveyance.

         Chase moved for summary judgment in May 2014. The trial court denied the motion, stating that the issue of whether Mr. Finley knew about Chase's lawsuit when he purchased Lot 26 was a genuine issue of material fact that precluded summary judgment. Chase filed a renewed motion for summary judgment in April 2015 in which it asked the trial court to hold as a matter of law that the consideration Mr. Finley gave in exchange for the quitclaim deed was too low to qualify as "value" for the property as a matter of law. The court denied Chase's renewed motion, but it found the following facts were undisputed for purposes of the motion:

1. On January 12, 2006, the Weavers executed a Deed of Trust to Mark Rosser, Trustee, for the benefit of Chase, a successor in interest to National Mortgage Network.
2. The Weavers intended to encumber their home located at 2070 Wild Cherry Drive by executing the above mentioned Deed of Trust.
3.The Deed of Trust described another lot not owned by the Weavers and it did not correctly describe the real estate at 2070 Wild Cherry Drive.
4. Chase brought this action to correct the error in the description of the property in the Deed of Trust.
5.In their depositions the Weavers admitted that they intended to encumber 2070 Wild Cherry Drive with the Deed of Trust.
6. On June 22, 2012, while this litigation was active and ongoing, the Weavers quitclaimed their interest in 2070 Wild Cherry Drive (also known as parcel 1) to Mr. Finley.
7.The land, 2070 Wild Cherry Drive (parcel 1) originally sold in 2006 for $110, 250.00.
8.Parcel 1 was appraised in 2012 for $96, 100.00.
9.The consideration transferred with the quitclaim deed by Mr. Finley was two (2) trucks between 12 and 22 years old.
10. The Weavers also lived in parcel 1 for some time after the quitclaim without the obligation to pay any rent to Mr. Finley.
11.The Weavers now pay rent to Mr. Finley.

         Following the trial court's order on its renewed motion, Chase filed a motion seeking clarification of the court's order. Specifically, Chase asked the court to state that (1) with respect to the Weavers, the Deed of Trust "shall be reformed to properly describe the Property" as Lot 26, 2070 Wild Cherry Drive and (2) the facts the court found undisputed for purposes of the motion for summary judgment "are, in fact, undisputed, and the Court need not and shall not entertain any additional proof, testimony, or evidence on them." The court declined to clarify its earlier order as Chase requested, but it did clarify its ruling as follows:

The issue of whether the Deed of Trust should be reformed with respect to Robin and Kerry Weaver (the "Weavers") is premature, as such reformation may unfairly prejudice Defendant Gary Eldon Finley ("Mr. Finley"). However, based on (1) the admissions in the Weavers' Deposition, (2) the Weavers' failure to defend either of the motions for summary judgment filed by Chase or otherwise participate meaningfully in this litigation, and (3) the undisputed findings of fact by this Court, the Weavers are hereby estopped from asserting any position contrary to the facts found to be undisputed by this Court in its May 22, 2015 Order on the Motion.
The parties tried the case on March 10, 2016, and the trial court issued a written opinion the following month in which it concluded that Mr. Finley was not a bona fide purchaser for value without notice of the property at issue. Specifically, the court found the following based on the proof introduced at trial:
It is undisputed that reformation of the Deed of Trust should occur as between Chase and the Weavers. Their testimony during the trial bolsters the Court's prior finding that the Weavers intended to encumber 2070 Wild Cherry Drive when they gave a note and Deed of Trust to National Mortgage. The Weavers bought their home on their land and intended to be bound to Chase's predecessor. They fully intended that their home would be subject ...

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