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Hanks v. First American Title Insurance Co.

Court of Appeals of Tennessee, Nashville

May 16, 2018

ROBERT A. HANKS, ET AL.
v.
FIRST AMERICAN TITLE INSURANCE CO.

          Session January 9, 2018

          Appeal from the Chancery Court for Sumner County No. 2015-CV-42 Louis W. Oliver, III, Chancellor

         Robert A. Hanks and Lee E. Hanks ("Plaintiffs") sued First American Title Insurance Co. ("First American") for breach of contract with regard to an owner's title insurance policy ("Title Policy"). First American filed a motion for summary judgment. After a hearing, the Chancery Court for Sumner County ("the Trial Court") granted summary judgment to First American after finding and holding, inter alia, that the Title Policy excluded any claim pursuant to either federal bankruptcy code or Tennessee law for an alleged fraudulent conveyance, fraudulent transfer, or preferential transfer. Plaintiffs appeal the grant of summary judgment to this Court. We find and hold that First American made a properly supported motion for summary judgment demonstrating that Plaintiffs' evidence is insufficient to establish an essential element of their claim and that Plaintiffs failed to demonstrate that there are genuine disputed issues of material fact with regard to the claims for fraudulent conveyance or fraudulent transfer. We further find and hold that the claim for post-petition transfer is not excluded from coverage pursuant to exclusion 4 of the Title Policy, and, therefore, summary judgment on the post-petition claim was improper. We, therefore, affirm the grant of summary judgment, in part, and reverse it, in part, and remand this case to the Trial Court for further proceedings consistent with this Opinion.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed, in part; Reversed, in part; Case Remanded

          E.Covington Johnston, Jr., Franklin, Tennessee, for the appellants, Robert A. Hanks and Lee E. Hanks.

          Reba Brown and Brad W. Craig, Nashville, Tennessee, for the appellee, First American Title Insurance Co.

          D.MICHAEL SWINEY, C.J., delivered the opinion of the court, in which RICHARD H. DINKINS and W. NEAL MCBRAYER, JJ., joined.

          OPINION

          D. MICHAEL SWINEY, CHIEF JUDGE

         Background

         Plaintiffs own real property located on Valley Brook Drive in Sumner County, Tennessee ("the Property"), which they purchased by Warranty Deed from Charles R. Dennie and Joanne R. Dennie ("the Dennies") on October 11, 2013. Charles Dennie is the son of Plaintiff Lee E. Hanks and the step-son of Plaintiff Robert Hanks. The Dennies had filed a Chapter 7 bankruptcy petition on October 10, 2013, the day before the transfer of the Property. The bankruptcy petition listed the Property as one of the Dennies' assets. At the closing on the Property, the Dennies executed an affidavit as to liens and encumbrances stating that no proceedings in bankruptcy or receivership had been instituted against them.

         In connection with the closing on the Property, Plaintiffs executed a note and deed of trust in the amount of $153, 000 payable to CMG Mortgage, Inc. Plaintiffs also purchased the Title Policy from First American. In pertinent part, the Title Policy provides:

EXCLUSIONS FROM COVERAGE
The following matters are expressly excluded from the coverage of this policy, and the Company will not pay loss or damage, costs, attorneys' fees, or expenses that arise by reason of:
3. Defects, liens, encumbrances, adverse claims, or other matters
(a) created, suffered, assumed, or agreed to by the Insured Claimant;
(b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an insured under this policy.
(c) resulting in no loss or damage to the Insured Claimant;
(d) attaching or created subsequent to Date of Policy (however, this does not modify or limit the coverage provided ...

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