David B. Starkey v. Wells Fargo Bank, N.A. ( 2019 )

04/23/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
February 19, 2019 Session
DAVID B. STARKEY V. WELLS FARGO BANK, N.A.
Appeal from the Chancery Court for Rutherford County
No. 13CV-26 Howard W. Wilson, Chancellor
No. M2018-00049-COA-R3-CV
After receiving notice of foreclosure proceedings, a homeowner filed suit against the
bank challenging the bank’s authority to foreclose, demanding verification of the debt,
and asserting multiple causes of action against the bank. The bank counterclaimed for
slander of title, breach of contract, and declaratory judgment and injunctive relief. In
response to the bank’s motion for summary judgment, the trial court determined that the
bank was the holder in due course of the promissory note and the deed of trust and
granted the bank summary judgment on all claims asserted by the homeowner and on the
bank’s claims for breach of contract and for declaratory and injunctive relief. The bank
subsequently moved forward with a foreclosure sale and purchased the homeowner’s
property. The trial court then held two hearings on damages and awarded the bank a total
of $194,554.23 in damages, which consists of the balance due on the loan, rent due after
the foreclosure, and attorney fees and litigation expenses. On appeal, the homeowner
raises numerous issues regarding the damages awarded to the bank. Finding no merit in
the issues raised by the homeowner, we affirm the decision of the trial court.
Tenn. R. App. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
ANDY D. BENNETT, J., delivered the opinion of the Court, in which RICHARD H. DINKINS
and W. NEAL MCBRAYER, JJ., joined.
David B. Starkey, Murfreesboro, Tennessee, pro se.
Jonathan Cole and Brittany Bartley Simpson, Nashville, Tennessee, for the appellee,
Wells Fargo Bank, N.A.-California.
OPINION
FACTUAL AND PROCEDURAL BACKGROUND
David Starkey purchased real property on Lascassas Pike in Murfreesboro on June
7, 2007 for $350,000. To finance the purchase, Mr. Starkey obtained a loan from Wells
Fargo Bank (“the Bank”) in the amount of $280,000. The indebtedness was evidenced by
a promissory note (“the Note”) dated June 7, 2007, and was secured by a deed of trust
recorded with the Rutherford County Register of Deeds on June 11, 2007, that expressly
states: “THIS IS A PURCHASE MONEY SECURITY INSTRUMENT.”
Following the execution of the Note and deed of trust, the Bank’s Vice President,
Joan M. Mills, endorsed the Note in blank. The Note and deed of trust were sold and
negotiated by transfer of possession to Federal Home Loan Mortgage Company
(“FHLMC”) on August 1, 2007. The Bank remained the servicer of the loan. On June
25, 2013, FHLMC transferred and negotiated the Note and deed of trust back to the Bank.
Mr. Starkey stopped making payments on the loan in May 2012. On July 16,
2012, the Bank sent him a default notice informing him that the loan would be
accelerated if he did not pay the entire delinquency by September 18, 2012. Also on July
16, 2012, the Bank sent Mr. Starkey a notice informing him that the Bank had the right to
initiate foreclosure proceedings against him due to his default on the loan. When Mr.
Starkey failed to bring the loan current, the Bank initiated foreclosure proceedings on the
property. The Bank sent Mr. Starkey a letter on October 3, 2012, informing him that his
loan had been referred to a foreclosure attorney and the foreclosure process had begun.
In an apparent effort to stop or interfere with the foreclosure proceedings, Mr.
Starkey created a cloud on the title to the property by filing numerous documents with the
Rutherford County Register of Deeds, including several UCC financing statements.1 He
then filed a complaint and two amended complaints challenging the Bank’s authority to
foreclose on the property and asking for verification of the debt and a declaratory
judgment as to the holder in due course of the Note. He further alleged causes of action
for lack of standing, fraud in the inducement, negligent misrepresentation, fraud in the
1
Mr. Starkey filed the following documents with the Rutherford County Register of Deeds: Notice of
Lien and UCC Financing Statement, November 1, 2012; Affidavit of Notice of Revocation of Power of
Attorney and Termination of Attorney in Fact, December 17, 2012; Notice of Qualified Written Request,
Complaint, Dispute of Debt and Validation of Debt Letter, TILA Request, December 17, 2012; second
UCC Financing Statement, December 21, 2012; Affidavit of Forgery, December 21, 2012; Notice of
Dispute, December 21, 2012; UCC Financing Statement Amendment, December 26, 2012; Notice of
Trustee Obligations, December 26, 2012; three UCC Financing Statement Amendments, December 27,
2012; Notice of Rescission, January 2, 2013; Abstract of Lien Lis Pendens, January 8, 2013; Notice of
Acceptance of Warranty Deed Certificate of Acknowledgment and Acceptance, August 23, 2013;
Affidavit and Declaration, January 3, 2014; and Notice Security Agreement, December 15, 2014.
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conveyance, and unjust enrichment. The Bank filed an answer, counter-complaint, and
amended counter-complaint alleging various claims including slander of title, breach of
contract, and a claim for declaratory relief.
On April 14, 2015, Mr. Starkey filed a motion for judgment on the pleadings,
arguing that, pursuant to the Truth in Lending Act (“TILA”), he rescinded the loan when
he sent the Bank a notice of rescission on December 31, 2012. The trial court denied Mr.
Starkey’s motion, finding that he sent the notice of the rescission outside the three-year
statute of repose provided under TILA and that the loan was a purchase money security
interest, which is an exempt transaction under TILA.
The Bank filed a motion for summary judgment on January 27, 2016. The trial
court granted the motion, finding that the Bank was the holder in due course of the Note
and deed of trust and that it had the right as the loan servicer to collect payments on the
Note while it was owned by FHLMC. After the trial court granted summary judgment,
the Bank moved forward with foreclosure proceedings. The foreclosure sale occurred on
March 1, 2017, and the Bank purchased the property for $308,633.09.2
A hearing to determine the Bank’s damages was scheduled for September 14,
2017. Three days before the hearing, Mr. Starkey filed a motion to appoint a court
reporter for the hearing. On the day before the hearing, he filed a motion to vacate the
memorandum and order granting summary judgment, arguing that the judgment was void
due to the same TILA rescission argument he made in his motion for judgment on the
pleadings.
During the damages hearing, Mr. Starkey made an oral motion to continue the
hearing so a court reporter could be appointed and a motion to dismiss for lack of subject
matter jurisdiction because the Note had been rescinded and declared void by the United
States Supreme Court. The trial court denied the motion to vacate, the motion to
continue, and the motion to dismiss. At the hearing, the Bank called one witness, Phillip
Cargioli, a Bank loan analyst. During his testimony, the Bank introduced seven exhibits:
(1) a Rule 1006 damages summary chart; (2) the Note; (3) the deed of trust; (4) bidding
instructions; (5) the trustee’s deed; (6) a Zillow.com estimate; and (7) the affidavit of
Bank attorney Jonathan Cole. The court concluded that it needed additional information
to determine attorney fees, so a second hearing was set for November 29, 2017.
At the second hearing, the Bank presented the affidavit of Jonathan Cole with
additional detail to support its claim for attorney fees. The trial court concluded that the
Bank should be awarded damages in the total amount of $194,554.23, based on “(1)
$81,578.16 as the balance of the June 7, 2007 loan following foreclosure, (2) $8,925.00
2
As of December 2015, Mr. Starkey owed $363,512.38 on the loan.
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in total rent due since foreclosure, (3) attorneys’ fees and litigation expenses of
$104,051.07.”
ISSUES ON APPEAL
On appeal, Mr. Starkey makes the following challenges to rulings made by the
trial court during the damages hearings on September 14 and November 29, 2017:
(1) Whether the trial court erred in admitting into evidence the seven exhibits
offered by the Bank at the September 14, 2017 hearing.
(2) Whether the trial court erred in admitting into evidence the testimony of the
Bank’s witness, Phillip Cargioli, at the September 14, 2017 hearing.
(3) Whether the trial court erred and violated Mr. Starkey’s due process rights
when it denied his motion to appoint a court reporter and his oral motion for a
continuance of the September 14, 2017 hearing.
(4) Whether the trial court erred in denying Mr. Starkey’s motions to dismiss for
lack of subject matter jurisdiction and to vacate a void judgment.
(5) Whether the trial court erred in granting the Bank damages for rental payments
pursuant to the deed of trust.
(6) Whether the trial court erred in failing to consider Mr. Starkey’s attempt to
tender payment.
(7) Whether the trial court erred in denying Mr. Starkey’s request to question the
Bank’s witness on the issue of the Bank’s status as a holder in due course of the Note.
ANALYSIS
We begin by noting that Mr. Starkey is a pro se litigant, both at trial and on appeal.
This court applies the following standards when evaluating the claims of pro se litigants:
Parties who decide to represent themselves are entitled to fair and equal
treatment by the courts. The courts should take into account that many pro
se litigants have no legal training and little familiarity with the judicial
system. However, the courts must also be mindful of the boundary between
fairness to a pro se litigant and unfairness to the pro se litigant’s adversary.
Thus, the courts must not excuse pro se litigants from complying with the
same substantive and procedural rules that represented parties are expected
to observe.
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Young v. Barrow, 130 S.W.3d 59, 62-63 (Tenn. Ct. App. 2003) (citations omitted); see
also Hessmer v. Hessmer, 138 S.W.3d 901, 903 (Tenn. Ct App. 2003). We allow pro se
litigants some latitude in preparing their briefs and endeavor to “give effect to the
substance, rather than the form or terminology,” of their court filings. Young, 130 S.W.3d
at 63.
I. Evidentiary Issues.
A. Exhibits.
Mr. Starkey asserts that the trial court erred in admitting exhibits 1 through 7 at the
September 14, 2017 damages hearing. We will consider each exhibit.
The admissibility of evidence is within the trial court’s sound discretion, and we
review the trial court’s decision to admit or exclude evidence under an abuse of discretion
standard. Mercer v. Vanderbilt Univ., Inc., 134 S.W.3d 121, 131 (Tenn. 2004); Otis v.
Cambridge Mut. Fire Ins. Co., 850 S.W.2d 439, 442 (Tenn. 1992). Under an abuse of
discretion standard, this court cannot substitute its judgment for that of the trial court.
Konvalinka v. Chattanooga-Hamilton Cnty. Hosp. Auth., 249 S.W.3d 346, 358 (Tenn.
2008). An abuse of discretion will be found only if the trial court “applied incorrect legal
standards, reached an illogical conclusion, based its decision on a clearly erroneous
assessment of the evidence, or employ[ed] reasoning that causes an injustice to the
complaining party.” Id.
(1) Exhibit 1: Rule 1006 Damages Summary (“Damages Summary”).
The Bank’s Damages Summary sets out key information concerning the loan
between the Bank and Mr. Starkey, including the loan balance, attorney fees, and court
costs. Mr. Starkey argues that the document was not part of the Bank’s business records,
was created in anticipation of the hearing, was hearsay, and that he did not have the
opportunity to review the underlying documents.
In submitting the summary, the Bank relied upon Tenn. R. Evid. 1006, which
provides:
The contents of voluminous writings, recordings, or photographs which
cannot conveniently be examined in court may be presented in the form of a
chart, summary or calculation. The originals or duplicates shall be made
available for examination or copying, or both, by other parties at reasonable
times and places. The court may order that they be produced in court.
Under Tenn. R. Evid. 1006, “[t]he fact that the summary was created in anticipation of
litigation does not disqualify it so long as the underlying data included in the summary
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satisfies the business records exception.” Regions Bank, N.A. v. Williams, No. W2013-
00408-COA-R3-CV, 2014 WL 575889, at *4 (Tenn. Ct. App. Feb. 12, 2014).
Tennessee Rule of Evidence 803(6), which contains the business records
exception to the hearsay rule, provides, in pertinent part:
A memorandum, report, record, or data compilation, in any form, of acts,
events, conditions, opinions, or diagnoses made at or near the time by or
from information transmitted by a person with knowledge and a business
duty to record or transmit if kept in the course of a regularly conducted
business activity and if it was the regular practice of that business activity
to make the memorandum, report, record or data compilation, all as shown
by the testimony of the custodian or other qualified witness or by
certification that complies with Rule 902(11) or a statute permitting
certification, unless the source of information or the method or
circumstances of preparation indicate lack of trustworthiness.
The business records exception requires documents to satisfy five criteria to qualify for
introduction:
1. The document must be made at or near the time of the event recorded;
2. The person providing the information in the document must have
firsthand knowledge of the recorded events or facts;
3. The person providing the information in the document must be under a
business duty to record or transmit the information;
4. The business involved must have a regular practice of making such
documents; and
5. The manner in which the information was provided or the document was
prepared must not indicate that the document lacks trustworthiness.
Alexander v. Inman, 903 S.W.2d 686, 700 (Tenn. Ct. App. 1995). In the present case, the
documents upon which the Damages Summary was based are the Note, the deed of trust,
bidding notes, and the trustee’s deed. Phillip Cargioli, a loan verification consultant for
the Bank, testified:
BS [Brittany Simpson, attorney for Bank]: . . . Mr. Cargioli, all the
documents outside of the Wells Fargo or this affidavit and the Zillow
printout, were they all kept in the regular course of business by Wells
Fargo?
PC [Phillip Cargioli]: Yes, and the, excluding the Damages Summary as
well. Yes.
....
BS: And do they [the documents] accurately reflect those records?
-6-
PC: Yes they do.
BS: And were they entered into the business records at or around the time
those documents were created?
PC: Yes they were. They were input by a person with knowledge who did,
it was input contemporaneously.
Furthermore, Tenn. R. Evid. 803(6) requires the foundation for the admission of
business records to be provided by the testimony of “the custodian or other qualified
witness” or by written certification. The term “qualified witness” is generally interpreted
broadly. Alexander, 903 S.W.2d at 700. The following principles govern:
The key is that the witness must have knowledge of the method of
preparing and preserving the business records at issue. The Tennessee
Supreme Court held that the witness must be able to testify as to the
identity of the record, the mode of preparation, and whether the record was
made in the regular course of business at or near the time of the event
recorded in the business record.
Neil P. Cohen, Sarah Y. Sheppeard & Donald F. Paine, TENNESSEE LAW OF EVIDENCE §
8.11(11)(a) (6th ed. 2012) (footnotes omitted) (citing Fusner v. Coop Constr. Co., LLC,
211 S.W.3d 686, 693 (Tenn. 2007)). On cross-examination, Mr. Cargioli testified that
his job responsibilities included reviewing and verifying business records, supplying
them to counsel, and testifying about them at hearings. He further stated:
Yes I am familiar with how records are created. When I first started, like I
said, as a Loan Servicing Specialist and Loan Adjuster, part of my job duty
was to notate files and create the records that exist on files to some degree.
Although that’s not my job function anymore, I had several hours of
training and side-by-side training that gave me the experience and the
know-how in order to testify to these types of matters.
Thus, Mr. Cargioli had the knowledge necessary to testify to the identity and mode of
preparation of the records and to the fact that they were made in the regular course of the
Bank’s business.
Finally, Mr. Starkey complains that he did not have the opportunity to examine the
records underlying the Damages Summary. The transcript of the September 14, 2017
damages hearing, however, reveals otherwise. Counsel for the Bank stated: “And Your
Honor, we have all of those documents [used to create Exhibit 1] here today. We’re
going to be presenting them to the Court. We are happy to let Mr. Starkey take a look at
them.”
We find no abuse of discretion in the trial court’s decision to admit Exhibit 1.
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(2) Exhibit 2: the Note.
Mr. Starkey’s argument here is that the trial court erred in admitting a photocopy
of the Note instead of requiring the original Note to be admitted into evidence because he
challenges the authenticity of the Note. As the Bank points out, Tenn. R. Evid. 1003
provides: “A duplicate is admissible to the same extent as an original unless a genuine
question is raised as to the authenticity of the original.” Any genuine issue as to the
authenticity of the photocopy of the Note was resolved when the trial court ruled upon
the Bank’s motion for summary judgment. The trial court concluded that Mr. Starkey
had “shown no evidence that would contradict Defendant’s status as holder of the Note
and Deed of Trust” and granted the Bank summary judgment on all of Mr. Starkey’s
claims, including his request for “declaratory judgment as to the holder in due course.”
Mr. Starkey has failed to show that the trial court abused its discretion in accepting
a copy of the Note into evidence.
(3) Exhibits 3, 4, 5, and 6: Deed of Trust, Bidding Instructions, Trustee’s Deed,
and Zillow.com Estimate.
Mr. Starkey makes various arguments that the trial court erred in admitting
Exhibits 3, 4, 5 and 6. The transcript of the September 14, 2017 damages hearing shows,
however, that Mr. Starkey failed to object to the introduction of any of these exhibits.
Pursuant to Tenn. R. App. P. 36(a), this court is not required to grant relief to a party
“who failed to take whatever action was reasonably available to prevent or nullify the
harmful effect of an error.” Similarly, Tenn. R. Evid. 103(a) provides, in pertinent part:
Error may not be predicated upon a ruling which admits or excludes
evidence unless a substantial right of the party is affected, and
(1) Objection. In case the ruling is one admitting evidence, a timely
objection or motion to strike appears of record, stating the specific ground
of objection if the specific ground was not apparent from the context;
Thus, “in order to raise an issue on appeal regarding the admissibility of evidence, the
party raising the issue must have made a contemporaneous objection.” McGarity v.
Jerrolds, 429 S.W.3d 562, 567 (Tenn. Ct. App. 2013). In the absence of such an
objection, we generally consider the issue waived. Id.
We find no abuse of discretion in the trial court’s admission of Exhibits 3, 4, 5,
and 6, and we also consider the issue waived.
-8-
(4) Exhibit 7: Affidavit of Jonathan Cole in Support of Bank’s Request for
Attorney Fees
Mr. Starkey asserts that the trial court erred in admitting the affidavit of Jonathan
Cole (Exhibit 7) because the Bank did not give him proper notice and time to examine the
affidavit. At the September 14, 2017 hearing, however, the trial court ruled that the Bank
needed to submit a more detailed record of the attorneys’ time and that there would need
to be another hearing in order to give Mr. Starkey a chance to review the information. In
accordance with this ruling, the Bank filed Mr. Cole’s second affidavit along with a more
detailed record of the attorneys’ time. Mr. Starkey filed an objection and motion to strike
Mr. Cole’s second affidavit. At the second damages hearing on November 29, 2017, the
trial court heard arguments on the Bank’s request for attorney fees and Mr. Starkey’s
motion to strike.
Mr. Starkey’s arguments regarding the admissibility of Mr. Cole’s first affidavit
are moot because, during the first damages hearing, the trial court granted Mr. Starkey’s
request for additional time and ordered the Bank to provide additional details and
documentation of the attorneys’ time. At the second damages hearing, the trial court
conducted a full hearing on Mr. Starkey’s motion to strike Mr. Cole’s second affidavit
and on the Bank’s request for attorney fees. Thus, contrary to Mr. Starkey’s assertion, he
had notice and the opportunity to examine the affidavit.
We find no abuse of discretion in the trial court’s decision to admit the affidavit of
Mr. Cole.
B. Testimony of Phillip Cargioli.
Mr. Starkey argues that the trial court erred in allowing Phillip Cargioli to testify
as a witness at the September 14, 2017 damages hearing. He asserts that Mr. Cargioli
was not sworn in as required by Tenn. R. Evid. 603, that the documents to which he
testified were not originals, and that he “did not meet the conditions required to qualify
for hearsay exceptions” under Tenn. R. Evid. 803(6).
Although Mr. Starkey failed to obtain a court reporter, the available transcript3
includes the notation “Swearing in inaudible” prior to Mr. Cargioli’s testimony. Thus,
contrary to Mr. Starkey’s argument, it appears that Mr. Cargioli was sworn in, as required
by Tenn. R. Evid. 603.4 Mr. Starkey did not make any objection or motion with regard to
3
The transcript in the record was transcribed from recordings made by Mr. Starkey using a personal
handheld recorder.
4
Rule 603 of the Tennessee Rules of Evidence states: “Before testifying, every witness shall be required
to declare that the witness will testify truthfully by oath or affirmation, administered in a form calculated
to awaken the witness’s conscience and impress the witness’s mind with the duty to do so.”
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Mr. Cargioli testifying as a witness at the hearing. As discussed above with respect to
Exhibits 3 through 6, a party may not object to evidence (or testimony) for the first time
on appeal. See TENN. R. APP. P. 36(a). Under Tenn. R. Evid. 601, “[e]very person is
presumed competent to be a witness except as otherwise provided in these rules or by
statute.”
We have already discussed the admissibility of the documents to which Mr.
Cargioli testified. Moreover, the admissibility of these documents is not determinative of
the admissibility of Mr. Cargioli’s testimony. As to Mr. Starkey’s hearsay argument, he
fails to point to any specific statements made by Mr. Cargioli that he believes constitute
hearsay. Without any specific objection, we consider such arguments waived.
We find no abuse of discretion in the trial court’s admission of Mr. Cargioli as a
witness qualified to testify in support of the Bank’s claim for damages.
II. Court Reporter.
Mr. Starkey argues that the trial court erred and violated his due process rights
when it denied his motion to appoint a court reporter and his oral motion for a
continuance of the September 14, 2017 hearing to allow him to retain a court reporter.
On September 11, 2017, three days before the first damages hearing (on
September 14, 2017), Mr. Starkey filed a motion asking the trial court to appoint a court
reporter for the September 14, 2017 hearing, citing Tenn. Code Ann. § 20-9-101, which
states:
Upon the trial of any cause or proceeding in any court of record, upon the
request of either party, the judge of such court shall appoint a competent
court reporter, who shall first be duly sworn to make a true, impartial and
complete stenographic report of all the oral testimony given in trial of the
cause or proceeding, as well as the rulings of the judge.
The courts have construed this provision as establishing a party’s right to have a court
reporter present at court proceedings. See Warren v. Warren, 731 S.W.2d 908, 909
(Tenn. Ct. App. 1985). In Warren v. Warren, the court determined that the trial court
erred in refusing a party’s request to have the court reporter at a conference in chambers.
Id. The court quoted with approval the following language concerning a similar statute:
In the absence of fault on the part of the litigant who insists on having the
trial reported, a statute which provides that, upon the request of either party,
the trial judge shall direct the reporter to take full stenographic notes of the
proceedings, is mandatory.
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Id. (quoting 75 AM.JUR.2D Trial § 58, p. 171). In another case, the court noted that,
although the parties typically retain the court reporter, a trial court may use its authority
under Tenn. Code Ann. § 29-9-101 to appoint a court reporter where there are two
competing court reporters chosen by the parties. Slaughter v. Slaughter, 922 S.W.2d 115,
116 n.1 (Tenn. Ct. App. 1995).
In this case, neither party retained a court reporter to attend the September 14,
2017 damages hearing despite having ample time to do so. When there was no court
reporter at the hearing, Mr. Starkey moved for a continuance due to the absence of a court
reporter. The trial court asked him why there was no court reporter present, and Mr.
Starkey responded that he had filed a motion requesting that a court reporter be appointed
by the court. The court denied Mr. Starkey’s motion, noting that the case had been set for
some time and that Mr. Starkey should have had a court reporter present if he wanted one
there.
In reviewing a trial court’s decision to grant or deny a motion to continue, we
apply the abuse of discretion standard. Blake v. Plus Mark, Inc., 952 S.W.2d 413, 415
(Tenn. 1997); In re Lydia N.-S., No. M2016–00964–COA–R3–PT, 2017 WL 420344, at
*4 (Tenn. Ct. App. Jan. 31, 2017). Mr. Starkey has not established that he was
prejudiced by the trial court’s decision, and we find no abuse of discretion in the trial
court’s denial of Mr. Starkey’s motion for a continuance.5
III. Motion to Vacate Judgment/Motion to Dismiss for Lack of Subject Matter
Jurisdiction.
Mr. Starkey asserts that the trial court erred in denying his motions to dismiss for
lack of subject matter jurisdiction and to vacate a void judgment.
A. Motion to Vacate Void Judgment.
On September 13, 2017, Mr. Starkey filed a motion pursuant to Tenn. R. Civ. P.
60.02(b)(3) asking the trial court to vacate its order of April 4, 2016, granting summary
judgment to the Bank on its counterclaim for breach of contract. The motion includes the
notation: “No hearing requested.” In his memorandum in support of this motion, Mr.
Starkey argued that the trial court “lacked subject matter jurisdiction to make a ruling
based on void instruments using those void instruments to authenticate and base its
conclusions and rulings.” It was Mr. Starkey’s position that the Note and the deed of
5
Pursuant to Local Rule 7.03 for Tennessee’s 16th District Chancery and Circuit Courts, when a motion is
filed and contains language indicating that no oral argument is requested (as is the case with Mr.
Starkey’s motion requesting a court reporter, filed on September 11, 2017), the court will hold the motion
for eight judicial days when the motion is served on the opposing party by mail in order to allow for a
response by the opposing party. Thus, Mr. Starkey’s motion was not filed in time for the court to rule
upon it before the scheduled hearing on September 14, 2017.
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trust were void instruments because he sent the Bank a letter on January 2, 2013, to
rescind the loan.
Despite Mr. Starkey’s failure to request a hearing on the motion to vacate, the
Bank agreed to argue the motion at the damages hearing on September 14, 2017. The
Bank argued that the trial court had considered a similar argument—that the loan was
rescinded by Mr. Starkey—in the context of Mr. Starkey’s earlier motion for judgment on
the pleadings. The Bank briefly reiterated the same reasoning: that Mr. Starkey sent the
letter after the three-year statute of repose for a rescission had passed and that, as a
purchase money security interest loan, the Note fell under an exception to the right of
rescission in the TILA. See 15 U.S.C. § 1635(e)(1), (f). The trial court overruled the
motion to vacate.
We review a trial court’s decision on a Rule 60 motion under an abuse of
discretion standard. Discover Bank v. Morgan, 363 S.W.3d 479, 487 (Tenn. 2012). We
find no abuse of discretion in the trial court’s decision to deny Mr. Starkey’s motion to
vacate the trial court’s order granting summary judgment.
B. Motion to Dismiss for Lack of Subject Matter Jurisdiction.
During the first damages hearing, Mr. Starkey made an oral motion to dismiss “for
lack of subject matter jurisdiction because I believe the Note and Deed of Trust have
been rescinded and declared void by the United States Supreme Court.” This motion was
based upon the same rescission argument discussed above and was denied by the trial
court for the same reasons.
Under the circumstances, subject matter jurisdiction presents a question of law,
which we review de novo with no presumption of correctness. Northland Ins. Co. v.
State, 33 S.W.3d 727, 729 (Tenn. 2000). We find no error in the trial court’s denial of
Mr. Starkey’s motion to dismiss.
IV. Rental Payments.
Mr. Starkey maintains that the trial court erred in granting the Bank damages for
rental payments pursuant to the deed of trust. He takes the position that he could not be
classified as a tenant of his own property and charged rent for living there. The Bank
asserts that, under the terms of the deed of trust, when Mr. Starkey failed to vacate the
property after it was sold to the Bank at the March 1, 2017 foreclosure sale, he became a
tenant. Section 22 of the deed of trust provides:
If the Property is sold pursuant to this Section 22, Borrower, or any person
holding possession of the Property through Borrower, shall immediately
surrender possession of the Property to the purchaser at the sale. If
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possession is not surrendered, Borrower or such person shall be a tenant at
will of the purchaser and hereby agrees to pay the purchaser the reasonable
rental value of the Property after sale.
In accordance with this provision, the trial court did not err in awarding the Bank
the rental value of the property during the time period after the sale when Mr. Starkey
continued to occupy it.
V. Tender of Payment.
Mr. Starkey argues that the trial court erred in failing to consider his attempt to
tender payment.
According to a copy of a letter dated January 7, 2013, sent by the Bank to Mr.
Starkey, Mr. Starkey had tendered some type of document that did “not meet the terms of
your note and mortgage loan that obligates you as the borrower to repay the loan in US
currency.” In its letter, the Bank stated: “The item you submitted is not legal tender and
will not be accepted now or in the future as payment on the note or mortgage.” The Note
itself states that the borrower promises to pay “U.S. $ 280,000.00” plus interest. Thus,
the obligation is to pay in U.S. currency, and Mr. Starkey did not tender payment in
accordance with the terms of the Note as contemplated under Tenn. Code Ann. § 47-3-
603, cited by Mr. Starkey.
We find no error in the trial court’s failure to consider Mr. Starkey’s attempt to
tender payment on the Note.
VI. Questioning of Witness.
Finally, Mr. Starkey avers that the trial court erred in denying his request to
question the Bank’s witness on the issue of the Bank’s status as a holder in due course of
the Note. The portion of the transcript (during the cross-examination of Mr. Cargioli) at
issue reads as follows:
DS [David Starkey]: Do you know who the holder [in] due course of this
contract is?
BS [Brittany Simpson, attorney for the Bank]: Your Honor, we would
object to the Court. He’s already made a ruling on that.
JW [Judge Wilson]: Sustained. I believe . . .
DS: Your honor I again object because holder [in] due course has never
been addressed by this Court.
JW: All issues regarding holder [in] due course have been decided by the
Court. We’re just here on the damages hearing.
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In its April 15, 2016 memorandum and order granting partial summary judgment
in favor of the Bank, the trial court made the following rulings regarding the Bank’s
status as the holder in due course of the Note and deed of trust:
Chapter 3 of the Uniform Commercial Code, as adopted in
Tennessee, maintains that a promissory note may be negotiated either by
endorsing it to a specific person or entity or by endorsing it in blank. If an
endorsement is made in blank, “an instrument becomes payable to bearer
and may be negotiated by transfer of possession alone until specially
endorsed.” Tenn. Code Ann. § 47-3-205(b). When an instrument is
endorsed in blank, the possessor of the instrument is deemed to be the
“holder.” Tenn. Code Ann. § 47-1-201(b)(21). The holder of a negotiable
instrument, such as a promissory note, is the party who is entitled to
enforce it. Tenn. Code Ann. § 47-3-301. Additionally, “it is well-settled
Tennessee law that any assignment of a note automatically transfers
beneficial ownership of the accompanying deed of trust.” Samples v. Bank
of America, N.A., No. 3:12-CV-44, 2012 WL 1309135, *4 (E.D. Tenn.
April 16, 2012).
The Record in this matter clearly shows that Plaintiff executed the
Note and Deed of Trust in favor of Defendant. The Note specifically
provides that “I understand that the Lender may transfer this Note.” The
Deed of Trust similarly provides that “the note or a partial interest in the
Note (along with this Security Instrument) can be sold one or more times
without prior notice to Borrower.” It is clear to the Court that the Note was
endorsed in blank by Defendant’s Vice President, Joan M. Mills. The Note
was then sold [and] negotiated by transfer of possession to FHLMC. The
note was then transferred and negotiated back to Wells Fargo on or around
June 25, 2013. Upon transfer, the Note carried with it the assignment of the
Deed of Trust to FHLMC and subsequently to Defendant as a matter of
law. See Branchant v. Wells Fargo Bank, N.A., No 14-5343, 2015 WL
3605883 (6th Cir. June 10, 2015). Because Defendant is the current holder
of the Note, it is entitled to enforce it along with all beneficial interest
pursuant to Tennessee law. See Tenn. Code Ann. §§ 47-1-201(b)(21) and
47-3-301 (2011). Plaintiff has shown no evidence that would contradict
Defendant’s status as holder of the Note and Deed of Trust. Accordingly,
Defendant is entitled to summary judgment on Plaintiff’s requests for (1)
declaratory judgment as to the holder in due course, (2) declaratory
judgment to quiet title to Property, (3) temporary and permanent injunction,
and causes of action for (4) fraud in the inducement, (5) fraud as to the
conveyance of the instrument, and (6) negligent misrepresentation.
(Footnote omitted).
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In light of the fact that the Bank’s holder in due course status had already been
adjudicated by the trial court, the court did not abuse its discretion in sustaining the
Bank’s objection to Mr. Starkey’s questions on the ground of relevancy.
CONCLUSION
The judgment of the trial court is affirmed, and this matter is remanded with costs
of appeal assessed against the appellant, David B. Starkey, and execution may issue if
necessary.
________________________________
ANDY D. BENNETT, JUDGE
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