Michael Morton v. Knox County Sheriff's Department ( 2019 )

02/15/2019
IN THE COURT OF APPEALS OF TENNESSEE
AT KNOXVILLE
May 31, 2018 Session
MICHAEL MORTON v. KNOX COUNTY SHERIFF’S DEPARTMENT, ET
AL.
Appeal from the Circuit Court for Knox County
No. 1-383-16 Kristi M. Davis, Judge
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No. E2017-02077-COA-R9-CV
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The plaintiff brought this action under Tennessee Code Annotated section 40-33-215
after a Knox County deputy seized a vehicle in which the plaintiff had a perfected
security interest. The Tennessee Department of Safety and Homeland Security and Knox
County both filed motions to dismiss the complaints against them on sovereign immunity
grounds. After the motions to dismiss were denied, permission to appeal under Rule 9
was granted. In this interlocutory appeal, we have been asked to determine whether the
trial court properly ruled on the sovereign immunity issue. After review, we affirm the
trial court’s denials of the motions to dismiss and remand this matter to the trial court for
further proceedings.
Tenn. R. App. P. 9 Interlocutory Appeal; Judgment of the Circuit Court
Affirmed; Case Remanded
JOHN W. MCCLARTY, J., delivered the opinion of the court, in which CHARLES D.
SUSANO, JR., J. and D. MICHAEL SWINEY, C.J., joined.
James Myers Morton, Deputy Law Director, Knoxville, Tennessee, for the appellant,
Knox County, Tennessee, and Knox County Sheriff’s Department.
Herbert H. Slatery, III, Attorney General & Reporter, Andree S. Blumstein, Solicitor
General, and Michael A. Meyer, Special Counsel, Nashville, Tennessee, for the appellant,
Tennessee Department of Safety and Homeland Security.
Herbert S. Moncier, Knoxville, Tennessee, for the appellees, Michael J. Morton, and
Travelers Casualty & Surety Company of America.
OPINION
I. BACKGROUND
On February 9, 2016, Knox County Sheriff’s Deputy D’Brian Varnado (“Deputy”)
seized a 1999 Honda Accord from Lyndsay Allred (“Driver”) after determining that she
was driving on a suspended Tennessee license in violation of Tennessee Code Annotated
section 55-50-504. The plaintiff, Michael Morton, was the holder of a perfected security
interest in the vehicle that was recorded on the automobile’s title.
As required by Tennessee Code Annotated section 40-33-203(a),1 on February 9,
Deputy prepared a notice of seizure upon taking possession of the automobile. Tennessee
Code Annotated section 40-33-203(a) provided as follows:
(a) Upon effecting a seizure, the seizing officer shall prepare a
receipt titled a “Notice of Seizure.” The notice of seizure
shall be a standard form promulgated by the applicable
agency. The applicable agency may adopt an existing notice
of seizure form.
The standard form notice of seizure adopted by the “applicable agency,” the Tennessee
Department of Safety and Homeland Security (“Department”), required Deputy to record
the perfected security interest of Morton that was recorded on the title and of public
record. Instead, Deputy indicated that there were no lienholders on the vehicle.
Tennessee Code Annotated section 40-33-204(a) required:
(a) Once personal property is seized pursuant to an applicable
provision of law, no forfeiture action shall proceed unless a
forfeiture warrant is issued in accordance with this section by
a general sessions, circuit, criminal court or popularly elected
city judge. The forfeiture warrant shall authorize the
institution of a forfeiture proceeding under this part. . . .
On February 10, 2016, Deputy appeared before a Knox County Magistrate for a hearing
and obtained a forfeiture warrant for the seized vehicle. Tennessee Code Annotated
section 40-33-204(b) states:
(b)(1) Any affidavit in support of a forfeiture warrant shall be
sworn to and state the following:
1
Several provisions of the forfeiture procedures were revised effective October 1, 2018.
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(A) The legal and factual basis making the property subject
to forfeiture;
....
(C) If the interest of a secured party with a duly perfected
security interest as reflected in the public records of titles,
registrations or other recorded documents, is sought to be
forfeited, the affidavit shall state with particular specificity
the officer’s probable cause that the secured party’s interest in
the property is nevertheless subject to forfeiture as well as the
legal and factual basis for forfeiture of the interest.
According to Morton, Deputy failed to comply with his duty in section 40-33-
204(b)(1)(C), as Deputy swore under oath that:
A search of the title history and testimony from witnesses has
established that none has a ownership, co-ownership or
secured interest in the seized property which is not subject to
forfeiture.
In accordance with Tennessee Code Annotated section 40-33-204(f)(1)-(3),
Department’s approved form for forfeiture warrants required the following testimony
from Deputy at the hearing for a forfeiture warrant:
(f) If a secured party’s interest is sought to be forfeited, the
judge shall put the seizing officer under oath and ask the
following questions:
(1) What is the officer’s probable cause that the
secured party is a co-conspirator to the activity
making the property subject to forfeiture;
(2) Did the secured party at the time the interest
attached, have actual knowledge of the intended
illegal use of the property; and
(3) Any other question deemed necessary to
determine the legal and factual basis for
forfeiture of the secured party’s interest.
Morton’s publicly recorded perfected security interest in the vehicle was not noted in
Deputy’s affidavit and forfeiture warrant. Thus, Deputy did not testify as to the
requirements above relating to Morton’s publically recorded security interest in the
vehicle. Had Deputy informed the magistrate of Morton’s security interest, he would
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have been required to establish probable cause in his section 40-33-204(b) affidavit and
his section 40-33-204(f) testimony that there was a legal and factual basis to forfeit
Morton’s security interest. Morton contends that but for “the dishonest, willful, and/or
false statements” made by Deputy, the magistrate would not have issued a forfeiture
warrant and Knox County would have been required to release the vehicle to Morton and
proceed only to forfeit any interest that Driver had over and above that of Morton.2
On February 11, 2016, the forfeiture warrant and supporting affidavit were
provided to Department, the “applicable agency” charged with conducting the
administrative forfeiture proceeding for the property. See Tenn. Code Ann. § 40-33-
202(1). After the receipt of the warrant, Department initiated administrative forfeiture
proceedings.
According to Morton, he was not initially notified by Department that a forfeiture
warrant had been issued. Instead, he learned of the vehicle’s seizure from Driver.
Morton contacted Department and was told that he would have to wait to obtain the
vehicle. On February 23, 2016, he received a letter from Department stating that the
“forfeiture warrant ha[d] been issued against property in which [he] ha[d] been identified
as having a security interest.” The letter noted that the vehicle “will be forfeited and
subject to public sale or other lawful disposition after thirty (30) days . . . unless” Morton
filed “a copy of the title … and the security agreement encumbering the seized vehicle.”
Morton was informed that “[f]ailure to properly file a copy of the title and security
agreement in a timely manner acts as a waiver of any security interest” he possessed in
the vehicle.
On March 23, 2016, Morton filed a formal claim for the vehicle as the secured
party and, on April 11, 2016, provided an affidavit with: 1) Bill of Sale of the automobile,
2) Odometer Disclosure Statement, 3) Promissory Note, and 4) Title to the vehicle with
the security interest of Morton. Department nevertheless continued to assert that the
vehicle was subject to forfeiture, contending that Morton “did not have a notarized
security agreement.”
On June 8, 2016, an ALJ ordered that disposition of the vehicle be made subject to
the lien interest of Morton. See In The Matter of Dept. of Safety and Homeland Security
v. One 1999 Honda Accord, Claimant Michael Morton, Docket No. 19.01-137424J, Case
No. R5427. The ALJ ruled that he was “unable to locate a requirement in the UCC that a
security agreement be notarized” and that “[i]t is unclear why the Department insisted
[Morton] produce such.” Specifically, the ALJ noted as follows:
The Department offers nothing to rebut [Morton]’s proof. . . .
Oddly, the Department challenges [Morton]’s standing to file
2
The magistrate never issued a forfeiture warrant for Morton’s security interest.
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his claim even in light of the overwhelming proof he brings in
support of his lienholder interest. [Morton]’s proof showing
he has a perfected lien on this vehicle necessar[il]y
encompasses the right to assert a claim to protect his interest
rendering the standing issue moot.
Despite the ALJ’s ruling, Department did not notify Knox County to release the vehicle
to Morton until July 11, 2016.
On August 18, 2016, Morton brought this action against Knox County and
Department for damages, attorney fees, and costs pursuant to Tennessee Code Annotated
section 40-33-215, which imposes liability upon the seizing agency when the seizing
officer acts in bad faith in seizing property or in failing to return seized property. Morton
noted that instead of his protected security interest being adjudicated at the forfeiture
warrant hearing one day after the seizure, he was required to adjudicate that same issue in
a contested case with Department. According to Morton, it took 174 days for him to
obtain his right to the possession and ownership of the vehicle. Knox County and
Department ultimately filed motions to dismiss Morton’s lawsuit, arguing sovereign
immunity barred the suit and precluded jurisdiction. The trial court denied the motions to
dismiss on June 21, 2017. The court noted as follows:
[I]f I accept both of the Defendants’ positions, I think nobody
is ever liable for any sort of wrong under this statute. I think
that’s where I end up. I think, clearly, that’s not what the
purpose of this statute is.
First, with respect to [Department], their basic argument is
that they are not a seizing agency under 40-33-215. We know
they are a seizing agency or capable of being one under the
definition that’s provided in Section 102(a), but they’re
saying that, for purposes of this case, they can’t be considered
a seizing agency.
And I would go back to – and, of course, the response of
[Morton] is that they’re the agent of Knox County and/or that
you can have two seizing agencies.
And what the statute says is it provides a cause of action
against a seizing agency if the seizing officer acted in bad
faith in seizing or in failing to return the property seized.
And so given what we have pled in this complaint, we kind of
have two separate scenarios, I guess. One, we’ve got the
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allegation that the initial seizing officer – or agency, I guess.
The officer being the Knox County Deputy – acted in bad
faith in his affidavit responding to the questions, what have
you, that there was no lien.
So we’ve got that, but we’ve also got the allegation in the
complaint that [Department], when it received notice from
[Morton] that there was a valid lien, acted in bad faith in
failing to return the property seized.
So when I consider what’s alleged in the complaint with the
language of the statute, I do think the complaint states a claim
for liability under the statute.
***
. . . [M]oving on to Knox County’s motion to dismiss, that is
based on . . . the argument that there was no intent to forfeit
the security interest. So, therefore, there was no probable
cause required, or there was no requirement that they provide
notice of the seizure.
And also, of course, the argument is that there are no damages
in this case, because Mr. Morton has said that the same thing
would have happened to the property regardless. He would
have still had to wait the same time and had the depravation
of the property for that period of time.
And I think to go there goes into issues that are beyond what I
have in front of me to make this determination. What I’m
making this determination on is, of course, on motions to
dismiss, is what’s pled in the amended complaint.
And that is that this officer made dishonest, willful or false
statements that there were no lienholders on the vehicle. And
that as a result of that, the vehicle forfeiture process continued
on to … Department … where [Morton] then had to litigate
the issue of whether or not he was a lienholder.
And the complaint, as I read it, says that if the officer – I
guess it’s but for the officer’s actions with regard to this
representing that there were no lienholders, then these things
would not have occurred.
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And so I think the amended complaint, as it is in front of me,
does make out a claim under the statute that this seizing
officer acted in bad faith and does state a claim for damages.
And that’s, of course, all I’m deciding on a motion to dismiss
when I read this complaint, “Is there a claim there?” And I
find that there is both as to [Department] and as to Knox
County.
On September 8, 2017, the trial court granted the interlocutory appeals sought by
Knox County and Department. On December 19, we allowed the Rule 9 application.
II. ISSUES
As this court has previously explained, “[f]or interlocutory appeals the only issues
that can be raised are those certified in the trial court’s order granting permission to seek
an interlocutory appeal and in the appellate court’s order granting the interlocutory
appeal.” Heatherly v. Merrimack Mut. Fire Ins. Co., 43 S.W.3d 911, 914 (Tenn. Ct. App.
2000). Therefore, this appeal presents the following issues for our review, as certified by
the trial court:
A) Whether Knox County’s sovereign immunity can be
removed by a plaintiff alleging a Tennessee Code Annotated
section 40-33-215 bad faith seizure cause of action when the
plaintiff’s interest as a “secured party” in the seized vehicle is
unaffected by the seizure and otherwise protected?
B) Whether Tennessee Code Annotated section 40-33-215
waives the sovereign immunity of the Department of Safety
and Homeland Security in an administrative forfeiture
proceeding in which Department was the “applicable agency”
conducting the proceedings pursuant to Tennessee Code
Annotated sections 40-33-201 through 40-33-216.
III. STANDARD OF REVIEW
Our standard of review in this interlocutory appeal involving a question of law is
de novo with no presumption of correctness. See Myers v. AMISUB(SFH), Inc., 382
S.W.3d 300, 307 (Tenn. 2012) (citing Graham v. Caples, 325 S.W.3d 578, 581 (Tenn.
2010)). We examine the legal sufficiency of Morton’s complaint and do not consider the
strength of his evidence; that is, we accept the complaint’s factual allegations as true and
construe them in Morton’s favor. Lind v. Beaman Dodge, Inc., 356 S.W.3d 889, 894
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(Tenn. 2011) (citing Stein v. Davidson Hotel Co., 945 S.W.2d 714, 716 (Tenn. 1997)).
IV. DISCUSSION
40-33-215. Cause of action against seizing authority in cases of bad faith.
(a) A person who has property seized in accordance with this
part shall have a cause of action against the seizing agency if
the seizing officer acted in bad faith in seizing or failing to
return property seized pursuant to this part.
(b) A person who prevails in an action against a seizing agency
pursuant to this section shall be entitled to:
(1) Reasonable attorney fees and court costs
necessarily incurred in seeking the return of the
seized property and in bringing the action
pursuant to this section; and
(2) Monetary damages resulting from the
improper seizure of the property.
(c) Monetary damages recoverable under this section shall be
limited to the rental value of property similar to that which
was seized for the period of time it was seized but in no event
shall the damages exceed the value of the seized property.
(d) For the purposes of this section, a seizing officer “acts in bad
faith” when the officer acts intentionally, dishonestly, or
willfully or the officer’s actions have no reasonable basis in
law or fact in regards to the seizure or failure to return the
property seized.
Tenn. Code Ann. § 40-33-215 (emphasis added).
Department argues that “sovereign immunity generally extends to state agencies
and state officers acting in their official capacity.” Colonial Pipeline Co. v. Morgan, 263
S.W.3d 827, 849 (Tenn. 2008). It further asserts that the trial court was wrong to
conclude that section 40-33-215 operates as a waiver of Department’s sovereign
immunity. Department contends that the statute’s plain language imposes liability on
seizing agencies for the wrongful acts of seizing officers, and that under the statutory
scheme for administrative forfeitures of personal property set forth in Tennessee Code
Annotated sections 40-33-201 to -215, a seizing officer is the law enforcement officer
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who initiates a forfeiture by the physical seizure of the property, issues the notice of
seizure, and obtains the forfeiture warrant. Tenn. Code Ann. §§ 40-33-203, -204.
According to Department, it was not the seizing agency in this case because it took no
such action. Rather an officer of Knox County physically seized the property, issued the
notice of seizure, and obtained the forfeiture warrant. Department claims that its only
role in this case was to conduct the administrative forfeiture proceedings upon receipt of
the forfeiture warrant, an action entirely separate and distinct from the seizure of the
property. Therefore, Department argues that section 40-33-215 imposes no liability on
the “applicable agency” conducting the administrative forfeiture proceeding and cannot
operate to waive its sovereign immunity in this case.
Knox County argues that Morton does not allege that he was a “person who has
property seized,” and that section 40-33-215(a) only provides a private right of action and
removes sovereign immunity for a “person who has property seized.” Knox County
further asserts that Morton’s security interest was unaffected by the statements made in
the affidavit for forfeiture warrant. As for Morton’s claims concerning the failure to
return the vehicle, Knox County admits that Department assumed jurisdiction over the
seizure after Knox County delivered the notice of seizure, affidavit for forfeiture warrant,
and forfeiture warrant to it.
According to Morton, Knox County’s Deputy was the initial seizing officer, but
Department became the seizing authority and/or seizing agency after it refused to
terminate forfeiture proceedings required by § 40-33-204(g) to release the vehicle to
Morton where there was no legal or factual basis to forfeit Morton’s security interest.
Morton contends that Department was a de jure and/or de facto seizing authority or
seizing agency within the meaning of section 40-33-215. He notes that there was no
determination by a judge, at a forfeiture warrant hearing, that Morton’s security interest
was subject to forfeiture. Morton asserts that Department sua sponte instituted forfeiture
proceedings against his security interest, without any prior authority by a judge, in
violation of section 40-33-204(a).
Governmental entities in Tennessee possess sovereign immunity from suit except
“in such manner and in such courts as the Legislature may by law direct.” See Tenn.
Const. art. I, § 17; see also Davidson v. Lewis Bros. Bakery, 227 S.W.3d 17, 19 (Tenn.
2007); Metro. Gov’t of Nashville & Davidson Cnty. v. Allen, 415 S.W.2d 632, 635 (Tenn.
1967). As we recently noted in H Group Construction, LLC v. City of LaFollette,
The doctrine of sovereign immunity has been part of the
common law of Tennessee for well over a century and
provides that suit may not be brought against a governmental
entity unless that governmental entity has consented to be
sued. The doctrine originated in feudal notions of the divine
right of kings, as the king “‘was at the very pinnacle of the
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power structure and was answerable to no court[.]’” The
longstanding rule of sovereign immunity is embodied in the
Tennessee Constitution, which provides, “Suits may be
brought against the State in such manner and in such courts as
the Legislature may by law direct.” Tenn. Const., Art. I, § 17.
In addition, Tennessee Code Annotated section 20-13-102(a)
provides, “No court in the state shall have any power,
jurisdiction or authority to entertain any suit against the state .
. . with a view to reach the state, its treasury, funds or
property, and all such suits shall be dismissed[.]” . . .
“Under both the common law doctrine and the constitutional
provision, ‘governmental entities may prescribe the terms and
conditions under which they consent to be sued, . . . including
when, in what forum, and in what manner suit may be
brought.’” Our state constitution specifically empowers the
legislature – not the judiciary – to waive the protections of
sovereign immunity. “The General Assembly undoubtedly
has control over the ‘manner . . . and courts’ in which suits
against governmental entities may be pursued.”
The “traditional construction” of Tennessee’s constitutional
provision regarding sovereign immunity “is that suits cannot
be brought against the State unless explicitly authorized by
statute.” In other words, “‘legislation authorizing suits
against the state must provide for the state’s consent in ‘plain,
clear, and unmistakable’ terms.’” Courts will not find a
waiver of sovereign immunity “‘unless there is a statute
clearly and unmistakably disclosing an intent upon the part of
the Legislature to permit such litigation.’”
Id., No. E2018-00478-COA-R9-CV, 2019 WL 354973, at *4-5 (quoting Bratcher v.
Hubler, 508 S.W.206, 208-09 (Tenn. Ct. App. 2015)) (internal citations omitted).
Whether sovereign immunity has been waived is a question of statutory
interpretation, and the “primary focus must be on the words chosen and enacted by the
legislature.” Mullins v. State, 320 S.W.3d 273, 283 (Tenn. 2010). Any “waiver of
sovereign immunity must be explicit, not implicit.” Colonial Pipeline, 263 S.W.3d at
853. As with all questions of statutory construction, whether a particular statute operates
as a waiver of sovereign immunity is a question of law. See State v. Wells, 62 S.W.3d
119, 121 (Tenn. 2001) (“[i]ssues of statutory interpretation are questions of law.”).
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When construing statutes, our task is to ‘“ascertain and give effect’” to the
Tennessee General Assembly’s intent ‘“without unduly restricting or expanding;” the
coverage of a statute beyond its intended scope. Sallee v. Barrett, 171 S.W.3d 822, 828
(Tenn. 2005)(quoting Houghton v. Aramark Educ. Res., Inc., 90 S.W.3d 676, 678 (Tenn.
2002)). We look to the “plain and ordinary meaning of the statutory language” used to
derive the legislature’s intent. Id. We must construe the words used “in the context in
which they appear in the statute and in light of the statute’s general purpose.” Lee Med.,
Inc. v. Beecher, 312 S.W.3d 414, 426 (Tenn. 2010).
We have been presented with a single issue for review: does section 40-33-215
remove sovereign immunity from Knox County and Department being sued pursuant to
the statute. We find that sovereign immunity as to both is removed. The trial court’s
interpretation of the statute is correct.
As noted by the trial court, both Knox County and Department claim sovereign
immunity. If both are correct, section 40-33-215 has no meaning. The statute, on its
face, removes Knox County’s sovereign immunity. Department could be liable to
Morton if it acted in bad faith in refusing to release the seized property after discovering
the valid lien. Both could be “seizing authorities” within the meaning of section 40-33-
215. In Watson v. Tenn. Dep’t of Safety, 361 S.W.3d 549, 556 (Tenn. Ct. App. 2011),
this court, speaking through then Judge, now Justice Holly Kirby, held that a claim
against Department under section 40-33-215 was proper for the wrongful deprivation of
property (“We agree with the trial court below that had [plaintiff] prevailed in the
forfeiture proceedings, he would have a claim against the Department of Safety under
Tennessee Code Annotated § 40-33-215 for wrongful deprivation of his property.”).3
Morton requests that we award attorney fees and costs for responding to this
appeal. We find that the attorney fee claim is premature. This interlocutory appeal
involves only the question whether the trial court erred in denying the motions to dismiss
on sovereign immunity grounds. The question whether Morton has prevailed in his
action and is entitled to attorney fees is not before the court.
V. CONCLUSION
For the foregoing reasons, we affirm the trial court’s denial of the motions to
dismiss by Knox County and Department on the sole issue of sovereign immunity. We
remand this matter for further proceedings. Costs on appeal are assessed to Knox County
3
Watson has been abrogated on other grounds by State v. Sprunger, 458 S.W.3d 482
(Tenn. 2015) (Kirby, J.).
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and the Department of Safety and Homeland Security.
_________________________________
JOHN W. MCCLARTY, JUDGE
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