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Rutherford County v. Delinquent Taxpayers of Rutherford County

Court of Appeals of Tennessee, Nashville

November 15, 2017


          Session August 29, 2017

         Appeal from the Chancery Court for Rutherford County No. 2011-RC-357, 11CV-498, 16CV-453 J. Mark Rogers, Judge

         A purchaser bought real property at a delinquent tax sale in Rutherford County, Tennessee. The delinquent taxpayer who owned the property at the time of the sale moved to redeem the property within one year of confirmation of the sale. After moving to redeem the property, the delinquent taxpayer conveyed it to a third party. The tax sale purchaser contested the redemption and, alternatively, requested reimbursement for expenses paid to preserve the value of the property during the redemption period. The trial court confirmed the redemption, divested title from the tax sale purchaser, vested title in the third party, and found that the tax sale purchaser was only entitled to reimbursement for property taxes paid on the property. The tax sale purchaser appealed. We affirm as modified.

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

          Jonathan C. Stewart, Nashville, Tennessee, for the appellant, Thomas G. Hyde.

          Eugene N. Bulso, Jr., and Paul Joseph Krog, Nashville, Tennessee, for the appellees, Terry Lounds and Barry Gregory.

          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.



         I. Factual and Procedural Background

         Prior to 2013, Terry Lounds owned real property located at 159 Dalton Circle, Rockvale, Tennessee ("the Property").[1] When Mr. Lounds failed to pay taxes assessed against the Property between 2008 and 2011, Rutherford County initiated this action to recover the delinquent property taxes. The trial court entered a default judgment against Mr. Lounds on March 13, 2013, and Rutherford County sold the Property at a tax sale on June 20, 2013. Thomas Hyde purchased the Property at the tax sale for $50, 000, subject to a one-year right of redemption. On July 17, 2013, the trial court entered a decree confirming the sale which, pursuant to Tenn. Code Ann. § 67-5-2702(a) (2013), [2]commenced the running of Mr. Lounds's one-year right of redemption.

         At the time of the tax sale, the Property was vacant and in disrepair. There were holes in the roof and numerous missing shingles. The yard consisted of overgrown grass and shrubs with branches growing into the eaves of the house. The inside of the house was in even worse condition. As a result of the holes in the roof, water puddled at the base of the walls in some rooms and mold and mildew formed on sections of the drywall. The house had been without electricity for approximately three years. There was no running water and some of the pipes had burst during a previous winter.

         In July 2013, Mr. Hyde took possession of the Property and began making repairs and improvements. He spent approximately $41, 900 between July and October 2013 cleaning up and improving the property by (1) repairing the windows, (2) replacing the roof, (3) installing a new HVAC unit, (4) removing moldy drywall and rotten carpet, (5) installing new drywall and carpet, (6) painting, (7) installing new bathroom fixtures, and (8) affixing a new mailbox. Thereafter, Mr. Hyde rented the Property to a tenant and collected $30, 525 in rent.

         On June 2, 2014, the trial court filed a letter from Mr. Lounds requesting that the letter "serve as a request for motion" to resolve the following issues: receipt by Mr. Lounds of the excess proceeds from the sale of the Property, his waiver of the remainder of the redemption period, and his expressed intent not to reclaim the Property, but rather to quitclaim it to Mr. Hyde. The trial court scheduled the letter/motion for a hearing on June 24, 2014, but the hearing never occurred.

         On June 23, 2014, Mr. Lounds filed a "Statement of Person Redeeming Property" along with payment of $19, 002.87 for the delinquent taxes, penalties, and interest. That same day, Mr. Lounds recorded a quitclaim deed transferring his interest in the property to a third party, Barry Gregory. After receiving notice from the clerk and master that Mr. Lounds had redeemed the Property, Mr. Hyde filed a motion contesting the redemption and, alternatively, seeking to recover the funds he expended on the Property. On March 12, 2015, following a lengthy discovery period, Mr. Lounds and Mr. Gregory filed a response to Mr. Hyde's motion contending that the redemption was valid and that most of the expenses sought by Mr. Hyde were not compensable upon redemption because they constituted improvements rather than costs to preserve the value of the Property.

         The trial court heard the matter without a jury on May 2, 3, and 10, 2016. On May 25, 2016, the trial court entered a decree confirming the redemption, finding that (1) Mr. Lounds properly redeemed the Property, (2) the title to the Property should be vested in Mr. Gregory pursuant to the quitclaim deed, (3) Mr. Hyde was entitled to reimbursement of $1, 937 for property taxes he paid on the Property but no other expenses, and (4) neither Mr. Lounds nor Mr. Gregory was entitled to recover rents collected by Mr. Hyde during the redemption period. On May 31, 2016, Mr. Hyde accepted a check from the clerk and master's office in the amount of $57, 200.22, which represented the taxes he paid on the Property during the redemption period ($1, 937) and a return of the purchase price he paid at the tax sale ($50, 000), plus interest at a rate of ten percent per annum. Thereafter, Mr. Hyde perfected this appeal.

         II. Standard of Review

         We review a trial court's findings of fact de novo with a presumption of correctness unless the evidence preponderates otherwise. Tenn. R. App. P. 13(d); Church v. Church, 346 S.W.3d 474, 481 (Tenn. Ct. App. 2010). Because a trial court is in a better position to observe a witness's demeanor as he or she testifies, a trial court is "accorded significant deference in resolving factual disputes when the credibility of the witnesses is of paramount importance." Davis v. Davis, 223 S.W.3d 233, 238 (Tenn. Ct. App. 2006) (citing Wells v. Tenn. Bd. of Regents, 9 S.W.3d 779, 783 (Tenn. 1999)). When a trial court fails to make specific findings of fact, we "review the record to determine where the preponderance of the evidence lies" with no presumption of correctness. State v. Delinquent Taxpayers, No. M2004-00951-COA-R3-CV, 2006 WL 3147060, at *3 (Tenn. Ct. App. Nov. 2, 2006). Interpretation of the statutes governing the sale of property for delinquent taxes involves a question of law, which we review de novo with no presumption of correctness. See In re Estate of Tanner, 295 S.W.3d 610, 613 (Tenn. 2009).

         III. Analysis

         A. Waiver of Right to Appeal

         As a preliminary matter, Mr. Lounds and Mr. Gregory contend that the appeal is moot because Mr. Hyde accepted payment of the sum awarded to him in the decree confirming the redemption. In response, Mr. Hyde asserts that the appeal is not moot because the only change in circumstance is that he lost in the trial court.[3] We believe the parties incorrectly frame the issue as a mootness inquiry. When a party accepts payment of a judgment and then appeals the judgment, Tennessee courts have considered the issue as being whether the party waived his or her right to appeal.

         In Bond v. Greenwald, 51 Tenn. 453, 458 (1871), the trial court awarded a seller a judgment for $10, 504.83 under a contract for the sale of cotton. After the trial court rendered its judgment, the seller appealed. Bond, 51 Tenn. at 465. The seller abandoned the appeal and received full payment of the judgment. Id. The seller then filed a writ of error challenging the amount of the judgment.[4] Id. The buyer argued that the seller waived his right to appeal because he accepted payment of the judgment. Id. at 467. Our Supreme Court rejected the argument, stating:

We are unable to see how [the seller's] proceeding to enforce his decree can be held, as matter of law, to be a waiver of his right afterwards to exercise the right of resorting to the writ of error, to have his own decree reviewed and reversed. He had indicated his dissatisfaction with its amount, by praying an appeal. In applying for this writ of error, within the time prescribed by law, he was in the exercise of a right secured by law to either party. He took the chances of the result of his writ of error-if he should fail in the Supreme Court to obtain any decree at all, or one less than he obtained below, he would have been compelled to refund. If he succeeded in obtaining a larger decree, he would make the difference.

Id. at 468-69 (emphasis added). Several cases have affirmed Bond in principle. See Burcham v. Carbide & Carbon Chems. Corp., 221 S.W.2d 888, 889-90 (Tenn. 1949); Peabody v. Fox Coal & Coke Co., 54 S.W. 128, 132 (Tenn. Ch. App. 1899); Gaines v. Fagala, 42 S.W. 462, 463 (Tenn. Ch. App. 1897).

         One of the more recent cases that affirmed the principles of Bond is McClendon v. House, 637 S.W.2d 883 (Tenn. Ct. App. 1982). In McClendon, a jury awarded the plaintiff damages in the amount of $6, 000 for injuries she sustained in an automobile accident. McClendon, 637 S.W.2d at 883. The plaintiff retrieved the funds deposited by the defendant with the court to satisfy the judgment and then appealed, challenging the sufficiency of the damages amount. Id. The defendant argued that the plaintiff waived her right to appeal because she accepted the benefits of the judgment. Id. We rejected this argument and adopted the following reasoning: "'[W]here a judgment is appealed on the ground that the damages awarded are inadequate, acceptance of payment of the amount of the ...

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