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Smartbank v. Stephens

Court of Appeals of Tennessee, Knoxville

October 21, 2019

SMARTBANK
v.
SANDRA STEPHENS

         Session: August 20, 2019

          Appeal from the Chancery Court for Hamilton County No. 08-0976 Jeffrey M. Atherton, Chancellor

         Appellant appeals the trial court's denial of her Tennessee Rule of Civil Procedure 60.02(3) motion for relief from a default judgment. Appellant argues that she was not properly served, thus rendering the default judgment void ab initio. Appellant also appeals the trial court's order allowing Appellee to execute its judgment on Appellant's right of survivorship interest in real property held as a tenancy by the entirety. Discerning no error, we affirm and remand.

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

          Adam U. Holland, Chattanooga, Tennessee, for the appellant, Sandra Stephens.

          Brian P. Mickles and S. Chase Smith, Chattanooga, Tennessee, for the appellee, Smartbank.

          Kenny Armstrong, J., delivered the opinion of the court, in which Charles D. Susano, Jr. and Thomas R. Frierson, II, JJ., joined.

          OPINION

          KENNY ARMSTRONG, JUDGE

         I. Background

         On January 25, 2008, Appellant Sandra Stephens executed a promissory note in favor of Cornerstone Community Bank ("Cornerstone"), the predecessor in interest to Appellee SmartBank. The note was in the principal amount of $50, 000 and was secured by a deed of trust on Ms. Stephens' property located at 116 Hendricks Boulevard in Chattanooga. Ms. Stephens defaulted on the note, and Cornerstone initiated foreclosure proceedings on the Hendricks property. The property was sold at foreclosure on or about October 24, 2008, but the sale price did not cover the full amount of the debt owed by Ms. Stephens.

         On or about December 5, 2008, Cornerstone filed a complaint to recover the deficiency on the note (approximately $32, 000). The summons issued on January 20, 2009. According to the summons return, process server William Vance Rose "[d]ropped service [at] 6211 Pine Marr after identifying [Ms. Stephens] from attached photo." In his affidavit, Mr. Rose states that he served the summons on Saturday, February 7, 2009. Ms. Stephens did not file an answer to the complaint; on March 12, 2009, Cornerstone moved for a default judgment. On March 23, 2009, the trial court entered an order granting the default and entered a judgment against Ms. Stephens for $32, 532 plus interest and attorney fees. The judgment was recorded in Hamilton County. Ms. Stephens did not pay on the judgment.

         On April 15, 2016, Kathryn Faulkner conveyed to Ms. Stephens and her then-husband, Richard, as tenants by the entirety, real property located at 1315 Duncan Avenue in Chattanooga.[1] On January 30, 2018, SmartBank, as Cornerstone's successor in interest, filed a "Motion for Order of Sale of Interest in Real Property," seeking to foreclose on Ms. Stephens' survivorship interest in the Duncan Avenue property to satisfy the default judgment, supra.

         On March 21, 2018, Ms. Stephens filed a response in opposition to SmartBank's motion for order of sale. In her response, Ms. Stephens made two substantive arguments. First, she argued that she was not properly served in the default judgment action, supra. Second, Ms. Stephens argued that SmartBank could not execute its lien on her survivorship interest in the Duncan Avenue property. On March 22, 2018, Ms. Stephens filed a Tennessee Rule of Civil Procedure 60.02(3) motion to set aside the March 23, 2009 default judgment based on the alleged failure of service. On March 23, 2018, SmartBank filed a response in opposition to Ms. Stephens' motion.

         On March 26, 2018, the trial court heard arguments on SmartBank's motion for order of sale on Ms. Stephens' survivorship interest in the Duncan Avenue property. The court reserved ruling pending the hearing on Ms. Stephens' Rule 60.02(3) motion to set aside the default judgment. The court heard the Rule 60.02 motion on August 13, 2018. By order of September 19, 2018, the trial court denied Ms. Stephens' motion. By separate order of September 19, 2018, the trial court granted SmartBank's motion. Ms. Stephens appeals.

         II. Issues

Ms. Stephens raises three issues as stated in her brief:
1. Does the evidence preponderate against the trial court's finding that substitute service of process was effective pursuant to Tenn. R. Civ. P. 4 et seq.
2. Did the trial court abuse its discretion when it denied Appellant's motion to set aside the default judgment pursuant to Tenn. R. Civ. P. 60.02 where service of process was ineffective, and the underlying judgment obtained by default was void ab initio.
3. If service was effective, may a creditor levy against a debtor's right of survivorship in a tenancy by the entirety that was created after the judgment lien against one spouse was recorded.

         III. ...


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