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Family Trust Services, LLC v. Reo Holdings, LLC

Court of Appeals of Tennessee, Nashville

May 14, 2018

FAMILY TRUST SERVICES, LLC, ET AL.
v.
REO HOLDINGS, LLC, ET AL.

          Session September 5, 2017

          Appeal from the Chancery Court for Davidson County No. 15-780-BC Ellen H. Lyle, Chancellor

         This appeal of a conviction for criminal contempt arises out of a civil suit brought by business owners against the owners and employees of a competing business for fraud in the use of the tax-sale and redemption process for real property. The trial court issued a temporary injunction, prohibiting defendants from, inter alia, recording deeds in real estate transactions without an authentic notary seal on the documents and requiring defendants to notify the court and opposing counsel of any documents they intended to record in the Register's Office. Appellant, the owner of the business which was the subject of the injunction, subsequently formed a trust in which Appellant retained the right to direct the distribution of income and principal and to amend, revoke, or terminate the trust. The trustee of the trust was conveyed real property in trust and recorded the deed without the notice required by the injunction. The property was subsequently sold, and, at Appellant's instruction, a portion of the proceeds of sale used to pay Appellant's legal fees for a related proceeding; the trial court held that, in so doing, the Appellant willfully and for a bad purpose violated the injunction, and held him in contempt. On appeal, Appellant argues that the evidence is insufficient to support the conviction. We have reviewed the record and conclude that there is evidence to support the contempt conviction beyond a reasonable doubt and accordingly affirm the judgment.

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

          William T. Ramsey, Thomas H. Dundon, and J. Isaac Sanders, Nashville, Tennessee, for the appellant, Charles Edward Walker.

          Eugene N. Bulso and Paul J. Krog, Nashville, Tennessee, for the appellees, Family Trust Services, LLC, Steven D. Reigle, Regal Homes, Co., Billy G. Gregory, John R. Sherrod, III.

          Herbert H. Slatery, III, Attorney General and Reporter; Andrée S. Blumstein, Solicitor General; and Alexander S. Rieger, Deputy Attorney General, for the Office of the Attorney General and Reporter.

          Richard H. Dinkins, J., delivered the opinion of the court, in which D. Michael Swiney, C.J., and Frank G. Clement, Jr., P.J., M.S., joined.

          OPINION

          RICHARD H. DINKINS, JUDGE

         I. Factual and Procedural History

         This appeal arises out of a suit filed by Family Trust Services, LLC, and Billy Gregory, who are in the business of buying and/or redeeming real property sold at delinquent tax sales. The Plaintiffs filed suit against a competitor, REO Holdings, LLC, its owners Charles Walker and Jon Paul Johnson, and its employees Julie Coone, Merdan Ibrahim, and Nationwide Investments, LLC. Plaintiffs asserted claims for violations of the Racketeer Influenced and Corrupt Organizations Act and the Tennessee Consumer Protection Act; slander of title; fraud; violation of Tennessee Code Annotated section 30-2-712 (recording false affidavits); liability pursuant to Tennessee Code section 66-22-113 (failure to discharge the duties and obligations of a notary public); trespass and ejectment; and civil conspiracy.[1] The Plaintiffs sought injunctive and declaratory relief, compensatory and punitive damages, and relief from judgments finalizing redemptions and quieting title to properties that were obtained by Defendants' alleged fraud.

         The trial court granted Plaintiffs a temporary injunction on July 24, 2015, stating in pertinent part:

The Plaintiffs have accused the Defendants of engaging in criminal acts of facilitating, assisting and/or forging signatures of notaries; committing perjury about the authenticity of real property documents; and aiding, abetting and/or committing fraud as to chain of title to real property.

***

Before the Court is clear, unrebutted evidence that in the space of the year and one half Defendant REO has been acquiring tax sale redemption properties, signatures and notary seals on at least 10 instruments (quitclaim deeds, affidavits of heirship and assignments of lien) were forged on 5

property transactions involving REO and its principals, Defendants Walker and Johnson. The five notaries, whose names and seals appear on property documents in this case, have filed declarations that these are forgeries.

The forgeries involve different notaries in different states, properties in various locations in Tennessee, with various grantors. The only common element in all the forgeries is that all of these various transactions involve Defendants REO, Walker and Johnson.
The Defendants do not dispute or contest the forgeries. Instead, they assert that they were unaware and were not involved in the forgeries and were recipients of forged documents.

***

. . .[T]he Court finds that the record in this case demonstrates a substantial likelihood of success on the merits by the Plaintiffs that the Defendants are not complying with the statutory electronic filing requirements of real property documents in conducting their business of acquiring tax sale properties; that noncompliance gives Defendants an advantage over their competition, the Plaintiffs, in the tax sale property marketplace; and that noncompliance poses substantial risk to the public welfare of the registration of forged real estate documents in the public record.
It is therefore ORDERED that upon the Plaintiffs posting a $5, 000 bond, Defendants REO Holdings, LLC; Charles E. Walker; Jon Paul Johnson and their employees and agents, including but not limited to, Defendant Julie Coone and Merdan Ibrahim, are enjoined from:
(1) Recording, whether electronically or in person, any document with any Register of Deeds in the state of Tennessee until the Defendants have completed the two actions of (a) Defendants having in their possession a "wet seal" color coded notary seal and/or an embossed notary seal on the document they intend to file and (b) Defendants having filed a Notice, with this Court and copy to counsel, with appended thereto every document, from this day forward, the Defendants intend to record with any Register of Deeds in the State of Tennessee;
(2)Transferring or encumbering the real property identified in their Response to Plaintiffs' Interrogatory No. 3 and in Exhibit A to their Response to Plaintiffs' Interrogatory No. 3 ...

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