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Munn v. Phillips

Court of Appeals of Tennessee, Knoxville

December 7, 2017

FRANKIE G. MUNN
v.
SANDRA M. PHILLIPS ET AL.

          Session September 13, 2017

         Appeal from the Circuit Court for Cocke County No. 33976-III Rex H. Ogle, Judge

         In this unjust enrichment action, the trial court awarded the plaintiff $42, 929.00 for the fair market rental value of improved real property that the plaintiff purchased at a foreclosure sale in 2012 but did not gain possession of until 2015. Following the foreclosure sale, the plaintiff was forced to litigate for a period of three years to obtain title, during which time the former owners of the home, who had defaulted in payments on their mortgage, remained in possession and failed to pay rent. The plaintiff subsequently filed this action in the trial court, seeking an award of fair market rental value of the home from the former owners. The trial court ordered that the former owners pay reasonable rent of $1, 200.00 per month from August 2, 2012, the date of the foreclosure sale, to July 24, 2015, the date upon which the court in the prior action entered a final order declaring the plaintiff to be the rightful owner of the property. The former owners have appealed. Because the trial court failed to make specific findings of fact and conclusions of law regarding the applicability of any res judicata defense, we vacate the trial court's judgment and remand this matter to the trial court for resolution of that issue.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Vacated; Case Remanded

          David S. Byrd, Morristown, Tennessee, for the appellants, Sandra M. Phillips and Danny Phillips.

          Ben W. Hooper, III, Newport, Tennessee, for the appellee, Frankie G. Munn.

          Thomas R. Frierson, II, J., delivered the opinion of the court, in which John W. McClarty, J., joined.

          OPINION

          THOMAS R. FRIERSON, II, JUDGE.

         I. Factual and Procedural Background

         The defendants, Sandra M. Phillips and Danny Phillips, were the owners of a home located in Cocke County, Tennessee, for which they defaulted on their mortgage payments in 2012. Consequently, the substitute trustee ("Trustee") for the Phillipses' lender, Beneficial Tennessee, Inc. ("Beneficial"), conducted a foreclosure sale of the Phillipses' home on August 2, 2012. The plaintiff, Frankie G. Munn, was the highest bidder and purchaser of the home at the sale. Following the sale, Trustee sought to cancel the sale and set it aside due to an alleged error with regard to the starting bid. Trustee further refused to deliver a deed to Mr. Munn, despite the fact that Mr. Munn had wired the purchase money to Trustee. As a result, on August 10, 2012, Mr. Munn filed an action in the Cocke County Chancery Court ("Chancery Court") seeking specific performance of the sale contract. In addition to Trustee, Mr. Munn named the Phillipses and others as defendants in the Chancery Court action. The Phillipses remained in possession of the home for the three-year period during which the specific performance litigation was pending.

         Following mediation and entry of a settlement agreement, the Chancery Court entered an agreed final order on June 23, 2015, declaring Mr. Munn to be the owner of the real property at issue.[1] Mr. Munn received a Substitute Trustee's Deed for title to the property, which he subsequently recorded. The Phillipses ostensibly vacated the home in August 2015. However, they paid neither mortgage payments to the lender nor any rental payments to Mr. Munn during the time period between the date of the foreclosure sale and the date of their departure from the residence.

         On December 28, 2015, Mr. Munn filed the instant action in the Cocke County Circuit Court ("trial court"), asserting a claim against the Phillipses for fair market rental value of the real property from August 2, 2012, the date of the foreclosure sale, until the date the property was vacated in August 2015. Mr. Munn alleged, inter alia, that the Phillipses failed to pay rent during that three-year period, resulting in their unjust enrichment. Mr. Munn further alleged that he was damaged by the denial of his use of and/or rental income derived from the real property and that the home sustained damage and depreciation during the period when the Phillipses were in possession of the home following foreclosure. Mr. Munn asserted that the foreclosure sale was conducted pursuant to the Phillipses' deed of trust, which contained a provision stating that if the property were sold in foreclosure, the Phillipses would immediately surrender possession of the property to the purchaser at the sale or would pay the reasonable rental value for same.

         The Phillipses filed an answer, admitting that they continued to occupy the real property while the prior litigation was pending. Furthermore, the Phillipses averred that they remained in possession of the property with the permission of their "bank" and with the "implicit permission" of Mr. Munn. According to the Phillipses, Mr. Munn never requested that they vacate the property, such that they relied on his implicit authorization to their detriment. They also alleged that because Mr. Munn had failed to seek rent payments in the prior litigation, he had waived that claim.

         On October 7, 2016, the trial court entered an order, which provided, inter alia: "Plaintiff shall have and recover from the defendants, jointly and severally, the sum of $42, 929.00 for rent at the rate of $1, 200.00 per month from August 2, 2012 to July 24, 2015." The trial court's order does not specifically address the Phillipses' asserted affirmative defenses. The Phillipses filed a timely notice of appeal.

         II. Issues Presented

         The Phillipses present the following issues for our review, which ...


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