City of Chattanooga v. Tax Year 2011 City Delinquent Real Estate Taxpayers

IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
August 10, 2016 Session

CITY OF CHATTANOOGA, ET AL. v. TAX YEAR 2011 CITY
DELINQUENT REAL ESTATE TAXPAYERS

Appeal from the Chancery Court for Hamilton County
No. 11222 Pamela A Fleenor, Chancellor
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No. E2016-00025-COA-R3-CV-FILED-FEBRUARY 10, 2017
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This appeal was filed by a purchaser who bought a parcel of real property in Hamilton
County, Tennessee, at a delinquent tax sale. After the sale, the person who had owned
the property at the time of the sale conveyed it to a married couple. The title agency, who
assisted with the closing, the original owner, and the couple moved to redeem the
property upon learning of the tax sale. The trial court granted their request, divested title
from the tax sale purchaser, and vested it in the original owner. The tax sale purchaser
appeals. We affirm as modified.

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

JOHN W. MCCLARTY, J., delivered the opinion of the court, in which CHARLES D.
SUSANO, JR., J. and FRANK G. CLEMENT, P.J., M.S., joined.

Jeremy Gourley, Murfreesboro, Tennessee, for the appellant, Thomas G. Hyde.

Barry L. Abbott, Chattanooga, Tennessee, for the appellees, Jerry C. Wilkinson, Jeffrey
Barton, Stacey Barton, and Pioneer Title Agency, Inc.

OPINION

I. BACKGROUND

Prior to 2015, Jerry C. Wilkinson (“Owner”) owned a condominium at 1131
Stringers Ridge Road, Unit 2-C (“the Property”) in Chattanooga, Tennessee.1 After a

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Tax Map and Parcel # 126N-C-003-C022.
delinquent tax sale on June 4, 2015, the Property was sold pursuant to a decree
confirming sale entered on June 24, 2015. Thomas Hyde (“Buyer”) purchased the
Property at the sale “subject to the rights of the defendant(s) to redemption according to
law.” He paid into the court $61,000. Buyer asserts that at this point in time, Owner only
owned the right to redeem and no more, with all ownership of the Property passing to
Buyer.

On June 25, 2015, one day after the decree from the delinquent tax sale was
entered, Owner sold the Property to Jeffrey T. Barton and his wife, Stacey L. Barton
(“Bartons”). It appears that the decree confirming sale to Buyer was recorded around a
month after the warranty deed Owner gave to Bartons.

On July 23, 2015, upon learning of the delinquent tax sale issue, Pioneer Title
Agency, Inc. (“Pioneer”) filed a “Statement Of Person Redeeming Property Sold At Tax
Sale” form in the Clerk & Master‟s office. See Tenn. Code Ann. § 67-5-2701. Pioneer,
who had insured title to the Property and handled the closing, checked the box on the
form that denoted: “I am making this redemption for the use and benefit of the
delinquent taxpayer.” Additionally, on that same day, Pioneer submitted a check in the
amount of $6,270.79 for the payment of taxes, fees, costs and interest due to the
Hamilton County Clerk & Master per that office‟s calculation.

Subsequently, on September 1, 2015, Owner filed a “Statement of Person
Redeeming Property Sold At Tax Sale” and checked the box that indicated: “I am the
delinquent taxpayer.” Likewise, on the same date, Bartons filed a “Statement of Person
Redeeming Property Sold At Tax Sale” in the Clerk & Master‟s office. They checked the
box noting:

I own a legal interest in the property. Describe: We
purchased the property on June 25, 2015. See the Warranty
Deed recorded in book 10504, Page 23 of the Register‟s
Office of Hamilton County, Tennessee which is attached . . .
and incorporated by reference herein. The amount required to
be paid pursuant to T.C.A. § 67-5-2701 was paid to the Clerk
& Master by Pioneer Title Agency, Inc. by check in the
amount of $6,270.79 on July 23, 2015. . . .

Prior to the filings by Owner and Bartons, Buyer filed a motion to deny
redemption and for reimbursement. He asserts that the statute is very specific about not
only who is to file, but who is to pay the monies required to redeem the property. He
argues that Pioneer was not an interested person entitled to redeem the Property and that
the statute requires that the actual debtor be the one who pays. According to Buyer, the
actual debtor, Owner, was not a person entitled to redeem because he had sold his right to
Bartons. Buyer further contends that Bartons, holding only Owner‟s right to redeem, did
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not pay the money to the Clerk & Master, and Pioneer did not have a designated power of
attorney to act on their behalf. Thus, according to Buyer, there was no valid tender as
required by the statute and the redemption was not valid.

The trial court conducted an evidentiary hearing on September 8, 2015. At the
hearing, Michael Ray Denson was the only witness to testify concerning Buyer‟s motion
for reimbursement of expenses. Denson testified that on June 22, 2015, three individuals
(Denson, Jim Hyde, and Lee Singhley) traveled (round trip) 210 miles from
Murfreesboro to Chattanooga to inspect a total of five properties – including the Property.
Denson presented an invoice requesting a grand total of $330.11 ($50 per hour for 4
hours for a subtotal of $200, plus 210 miles at 57.5 cents per mile for mileage
reimbursement of $120.75 plus tax). Denson stated that the mileage request was not
apportioned to any of the other properties and that the figure of $50 per hour was an
estimate. A month later, on October 9, 2015, the court entered an order denying Buyer‟s
motion to deny redemption, granting the motion to redeem, and granting the request by
Buyer for reimbursement of expenses in the amount of $50. The court declined to award
the mileage reimbursement requested. Subsequently, the court entered an order setting
aside the delinquent tax sale as to the Property, divesting title from Buyer, and vesting it
in Owner. Buyer thereafter filed a timely notice of appeal.

II. ISSUES

We restate the primary issue before us for review as whether the trial court
properly allowed the redemption of the real property which had been sold for delinquent
taxes. We also address whether Buyer was entitled to reimbursement for expenses in
excess of the $50 awarded, and whether Buyer is liable for damages for pursuing a
frivolous appeal.

III. STANDARD OF REVIEW

The factual findings of the trial court are accorded a presumption of correctness on
appeal and will not be overturned unless the evidence preponderates against them. Tenn.
R. App. P. 13(d). The trial court‟s conclusions of law are subject to a de novo review
with no presumption of correctness. Blackburn v. Blackburn, 270 S.W.3d 42, 47 (Tenn.
2008); Union Carbide Corp. v. Huddleston, 854 S.W.2d 87, 91 (Tenn. 1993). Because
trial courts are in a far better position than this court to observe the demeanor of the
witnesses, the weight, faith, and credit to be given witnesses‟ testimony lies in the first
instance with the trial court. Roberts v. Roberts, 827 S.W.2d 788, 795 (Tenn. Ct. App.
1991). Consequently, where issues of credibility and weight of testimony are involved,
this court will accord considerable deference to the trial court‟s factual findings.

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 In this case we are called upon to interpret statutes. Issues of statutory
construction are questions of law, see Jordan v. Baptist Three Rivers Hosp., 984 S.W.2d
593, 599 (Tenn. 1999); Beare Co. v. Dep’t of Revenue, 858 S.W.2d 906, 907 (Tenn.
1993), and must be reviewed de novo without a presumption of correctness. See Ridings
v. Ralph M. Parsons Co., 914 S.W.2d 79, 80 (Tenn. 1996).

IV. DISCUSSION

Tennessee Code Annotated Title 67, Chapter 5, deals solely with property taxes,
and Part 27 of that chapter covers redemptions. Tennessee Code Annotated section 67-5-
2701(a)(3)(C) provides that a “person entitled to redeem property” includes “any
interested person . . . as of the date of the sale and the date the motion to redeem is filed.”
Section 67-5-2701(b) provides:

In order to redeem a parcel, the person entitled to redeem
shall file a motion to such effect in the proceedings in which
the parcel was sold. The motion shall describe the parcel, the
date of the sale of the parcel, the date of the entry of the order
confirming the sale and shall contain specific allegations
establishing the right of the person to redeem the parcel.
Prior to the filing of the motion to redeem, the movant shall
pay to the clerk of the court an amount equal to the total
amount of delinquent taxes, penalty, interest, court costs, and
interest on the entire purchase price paid by the purchaser of
the parcel. The interest shall be at the rate of twelve percent
(12%) per annum, which shall begin to accrue on the date the
purchaser pays the purchase price to the clerk and continuing
until the motion to redeem is filed. If the entire amount
owing is not timely paid to the clerk or if the motion to
redeem is not timely filed, the redemption shall fail.

Tenn. Code Ann. § 67-5-2701(b).

Tennessee Code Annotated section 67-5-2701(a)(1) provides, in pertinent part:
“Upon entry of an order confirming sale of a parcel, a right to redeem shall vest in all
interested persons.” Interested person is defined in Tennessee Code Annotated section
67-5-2502 as follows:

“Interested person,” “person owning an interest in a parcel”
and “owner” means a person . . . that owns an interest in a
parcel and includes a person, . . . that holds a lien against a
parcel or is the assignee of a holder of such a lien. “Interested
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 person” also includes a person or entity named as nominee or
agent of the owner of the obligation that is secured by the
deed or a deed of trust and that is identifiable from
information provided in the deed or a deed of trust, which
shall include a mailing address or post office box of the
nominee or agent. However, a person named as a trustee
under a deed of trust, contract lien or security instrument, is
not included in such definition unless the person has a
separate interest in the parcel.

Tenn. Code Ann. § 67-5-2502(c)(1)(B). The redemption period is one year from the date
of entry of the decree confirming sale. Tenn. Code Ann. § 67-5-2701(a)(1).

The statutory right of redemption is a valuable right. Plemons v. Gale, 396 F.3d
569, 575 (4th Cir. 2005); VOSR Indus., Inc. v. Martin Props., Inc., 919 So.2d 554, 556
(Fla. Dist. Ct. App. 2005); Miles Homes Div. of Insilco Corp. v. City of Westhope, 458
N.W.2d 321, 326 (N.D. 1990). Thus, the courts, as a matter of general policy, construe
the statutes governing the sale of property for delinquent taxes, and specifically the
statutes providing the right of redemption, liberally in favor of the redeeming party.
Blizzard v. Moniz, 518 S.E.2d 407, 410 (Ga. 1999); Serion v. Thornton, 85 P.3d 186, 193
(Haw. 2004); In re County Treasurer of Cook County, 753 N.E.2d 363, 367 (Ill. App. Ct.
2001); Norwood v. Moore, 932 So.2d 63, 66 (Miss. Ct. App. 2006); Carney v.
Philippone, 806 N.E.2d 131, 134 (N.Y. 2004).

It is not disputed that Owner was the “Assessed Owner” of the Property as of the
date of the delinquent tax sale and as of the date of the entry of the Decree Confirming
Sale. Owner is also shown as grantor on the warranty deed he signed on June 25, 2015,
when he transferred the Property to Bartons. Therefore, as of the date of the sale, Owner
was a “person entitled to redeem” and an “interested person” as defined in Tennessee
Code Annotated section 67-5-2701(a)(3)(C) and Tennessee Code Annotated section 67-
5-2502 because he was, in fact, the owner of the Property at that time. Admittedly, he
had lost this status by “the date the motion to redeem [was] filed.” Tenn. Code Ann. §
67-5-2701(a)(3)(C).

When Bartons completed their form, they were entitled to redeem and interested
persons as defined in Tennessee Code Annotated section 67-5-2701(a)(3)(C) and 67-5-
2502. In State v. Delinquent Taxpayers, No. M2002-00718-COA-R3-CV, 2003 WL
21171858 (Tenn. Ct. App. Aug. 18, 2003), a panel of this court held that a third-party
who purchased property previously sold at a delinquent tax sale from the delinquent
taxpayer can exercise the right of redemption. The court observed: “In Tennessee it is
well settled that „[t]he right of a party, whose land has been sold by judicial sale, to
redeem that land has always been treated as an estate or interest in the land which he
might sell . . . .‟” Id. at *2 (quoting Herndon v. Pickard, 73 Tenn. 702, 704 (Tenn.
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1880)). The court also discussed Fite v. Jennings, 246 S.W.2d 1 (Tenn. 1952), wherein
the Tennessee Supreme Court observed: “It cannot be doubted that Jennings, the
judgment debtor, had the absolute right to sell and dispose of his statutory right of
redemption[,]” and that “[t]his was the effect of the deed to [third party].” Id. at 3. See
also Reaves v. Bank of Hartsville, 64 S.W.307 (Tenn. Ct. App. 1900) (stating that “the
right of redemption exists in the original debtor . . . and . . . this right may be transferred
to a third party, who will then stand in the shoes of the debtor, and may redeem, just as he
could have redeemed.”).

In this case, the only interest possessed by Owner at the time of the sale to Bartons
was the right of redemption. His attempted conveyance in fee simple was effective to
transfer all his interest in the Property, which consisted solely of the right of redemption.
See also Wyatt v. Beard, 15 S.W.2d 990, 991 (Ark. 1929) (stating that the right of
redemption arising from a tax sale belongs to “any person having an interest in or title to
the land sold . . . and it is immaterial whether this title or interest existed at the time of the
. . . sale. It suffices if it existed or is acquired before the period of redemption expires.”);
Belmore v. State Tax Comm’n, 245 P.2d 149, 153 (N.M. 1952) (opining that the statutory
right of redemption arising from a tax sale is “an interest which the former owner may
assign or devise . . . .”).

Accordingly, it is clear that persons entitled to redeem (Bartons) filed a motion
requesting redemption of the Property within one year of the entry of the Decree
Confirming Sale. The analysis of whether the trial court properly affirmed the
redemption of the real property is concluded with a determination as to whether the taxes,
interest, and court costs have been paid as required by Tennessee Code Annotated section
67-5-2701(b). That section provides: “Prior to the filing of the motion to redeem, the
movant shall pay the clerk of the court an amount equal to the total amount of delinquent
taxes, penalty, interest, court costs and interest on the entire purchase price paid by the
purchaser of the parcel.”

The record in this case reveals that Pioneer submitted a check in the amount of
$6,270.79 for the redemption of the Property. On appeal, Buyer does not contest the fact
that the taxes, interest and required costs were paid, the timeliness of the payment, or the
calculation of the amount paid. Buyer challenges the source of this payment. He argues
that Bartons “failed to tender the monies required by the statute to the Clerk to perfect
their right to redeem.” The record on appeal contains no testimony concerning the
ownership or source of the funds delivered to the Clerk & Master.

In Toledo Trust Co. v. Yakumithis Enterprises, Inc., 519 N.E.2d 425 (Ohio Ct.
App. 1987), the attorney for Yakumithis deposited a check bearing the name of another
entity, Luttrell Auto Supply (“Luttrell”), and was handed a receipt issued to Luttrell. The
court found this fact did not require the conclusion that Luttrell redeemed the property, as
Luttrell did not receive title to the property when its check was deposited. The court held
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that Luttrell‟s act of providing the funds that were used by Yakumithis to redeem its
property did not mean that Luttrell “redeemed” the property. The Yakumithis court found
that the word “redeem” is not so broad as to encompass Luttrell‟s act of financing
Yakumithis‟ redemption of its own property. The court observed that such an
interpretation of the word “redeem” would be unreasonable because it would unduly
restrict Yakumithis‟ right to redeem its property. In the view of the court, the word
“redeem” should be liberally interpreted in Yakumithis‟ favor so that Yakumithis‟
redemption of its property could be facilitated. See Kinney v. Hoffman, 86 N.E.2d 774
(Ohio 1949); Masterson v. Beasley, 3 Ohio 301, 302 (1828). We agree.

In our case, Pioneer did not redeem the Property because it did not receive title to
the Property in exchange for depositing its check with the clerk. Since title did not pass
to Pioneer upon deposit, we hold that the redemption was proper. The source of the
funds, the owner of the checking account, or the identity of the person who delivered the
payment to the Clerk & Master makes no legal difference. There is no statutory
requirement as to the ownership or source of the funds.

Buyer further contends that the trial court erred in granting the motion to redeem
because Pioneer, Owner, and Bartons had joined together in one motion. The trial court,
however, did not hold that the parties had jointly redeemed the property. The court‟s
order of October 9, 2015, simply noted that the parties had joined together in a single
motion in addition to each of the parties filing separate statements to redeem the property
to ensure that whoever has the right to redeem the property had exercised that right. We
find no error in this exercise of caution by the parties.

Additionally, Buyer argues that he was entitled to reimbursement for expenses in
excess of the $50 he was awarded. Tennessee Code Annotated section 67-5-2701(e)
specifies six categories of expenses for which the tax purchaser is allowed to recover in
the statutory redemption process:

(e) Additional sums to be paid by the proposed redeemer at
the demand of the purchaser, shall include the following:

(1) Additional ad valorem taxes, penalty, interest and court
costs paid by the purchaser secured by a lien against the
parcel;

(2) Reasonable payments made by the purchaser for
insurance on the parcel and any improvements thereon;

(3) Reasonable cost paid by the purchaser to avoid
permissive waste of the parcel;

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 (4) Reasonable expenses paid by the purchaser as a result of
a judicial or administrative order or other official notice
requiring the purchaser to immediately bring the property into
compliance with applicable building code or zoning
regulations;

(5) Reasonable payments by the purchaser for homeowner‟s
association dues or obligations resulting from covenants
running with the land which are secured by a lien against the
parcel; and

(6) Additional interest at the rate set out in subsection (b),
accruing from the date the motion to redeem was filed until
the date the purchaser‟s response was filed. If the court
determines that the purchaser has not delayed consideration
of the motion to redeem and that any response filed by the
purchaser for additional funds was based on a reasonable
expectation that the expenditures of the purchaser were
reimbursable pursuant to this section, then the court may
require the proposed redeemer to also pay additional interest
at the same rate, accruing from the date the purchaser‟s
response was filed until the date of such payment.

Tenn. Code Ann. § 67-5-2701(e).

Upon our review of the record, we find that the trial court‟s ruling was reasonable
and within its discretion. The testimony and scant evidence did not support the award of
additional reimbursement. However, we do not find that the appeal was frivolous.

V. CONCLUSION

The trial court‟s decision granting the motion for redemption is affirmed. This
matter is remanded to the trial court to amend its prior order to vest title to the Property in
the names of Jeffrey Barton and wife, Stacey Barton, based on the warranty deed wherein
Bartons are the successors in interest to Jerry C. Wilkinson. The cost of this appeal is
accessed to appellant, Thomas Hyde.

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JOHN W. MCCLARTY, JUDGE

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