Cadlerock Joint Venture II, L.P. v. Susan Elaine Dunlap, Lady Bug Corporation, Trustee for BLF Land Trust, and BLF Land Trust

Citation: Not availableDocket: M2011-02702-COA-R3-CV

Court: Court of Appeals of Tennessee; October 18, 2012; Tennessee; State Appellate Court

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A judgment creditor, CadleRock Joint Venture II, L.P., initiated legal action against the owners of two parcels of real property, along with the debtor's ex-wife, to enforce a judgment lien tied to property previously owned by the debtor, Laddie T. Hillis. The ex-wife contended her interest, awarded through a divorce decree after the judgment lien was recorded, took precedence over the creditor's claim. The trial court ruled in favor of the creditor, leading to an appeal by the ex-wife and the new property owners.

The case originated when Fifth Third Bank secured a judgment against Hillis in 2005, later transferring the judgment to CadleRock. In 2010, Hillis and his then wife, Susan Dunlap, entered a Marital Dissolution Agreement (MDA) that transferred Hillis's interests in the properties to Dunlap, which was later incorporated into the divorce decree. The decree and a quitclaim deed were recorded in December 2010.

CadleRock filed suit in February 2011 to enforce its judgment lien, seeking to invalidate the transfers from Hillis to Dunlap and from Dunlap to Lady Bug Corporation, acting as trustee for BLF Land Trust. Dunlap and the corporation filed answers denying the allegations and asserting affirmative defenses, with Dunlap also crossclaiming against Hillis for breach of the divorce decree.

The court upheld the trial court's summary judgment for CadleRock, affirming the priority of the judgment lien over the ex-wife's claims to the property. The appeal highlighted the complexities surrounding the conveyance and the identity of the grantee in the quitclaim deed, but no substantive issues arose from the ambiguity.

Highland Rim Energy was included in a lawsuit due to its lessee interest in an Oil and Gas Lease from December 10, 2009, which provided it notice regarding the property dispute. The court granted CadleRock's motion for summary judgment, ruling that the MDA was not binding on Ms. Dunlap and Mr. Hillis until court approval on August 23, 2010. Even if the land transfer from Mr. Hillis to Ms. Dunlap had been effective at the MDA's execution, it would not have been valid against CadleRock per Tenn. Code Ann. §§ 66-26-101 and -103. The appeal concerns the summary judgment grant, where the moving party must demonstrate no genuine issue of material fact exists and is entitled to judgment as a matter of law. The court reviews such rulings de novo, favoring the nonmoving party's evidence and inferences while disregarding conflicting evidence. Defendants argued the trial court used an incorrect standard by referencing Byrd v. Hall instead of Hannan v. Alltel Publishing Co. However, since this case was filed before July 1, 2011, the amended summary judgment standards under Tenn. Code Ann. § 20-16-101 are inapplicable. The Hannan decision reaffirms summary judgment's availability when the moving party shows no material fact dispute and entitlement to judgment under Tenn. R. Civ. P. 56.04.

A properly supported motion by the moving party shifts the burden of production to the nonmoving party to demonstrate a genuine issue of material fact. To accomplish this, the moving party must either negate an essential element of the nonmoving party's claim or establish an affirmative defense. If the moving party fails to meet this initial burden, the court should dismiss the motion for summary judgment. Summary judgment is granted only when, viewing facts in favor of the nonmoving party, no genuine issue of material fact exists. 

In this case, CadleRock's motion for summary judgment was supported by a statement of undisputed material facts, the complaint and responses to admissions, and affidavits from an attorney and CadleRock’s counsel. These materials established that CadleRock’s lien was recorded on June 15, 2010, before Mr. Hillis transferred the parcels to Ms. Dunlap, with no recorded claims by Ms. Dunlap or related entities as of November 18, 2010. Under Tennessee law, CadleRock's judgment became a lien effective against subsequent purchasers, including Ms. Dunlap.

Consequently, CadleRock demonstrated the absence of a genuine issue of material fact, shifting the burden to the defendants to show otherwise. In response, defendants submitted Ms. Dunlap's affidavit, which acknowledged her title to the property vested through a divorce decree on August 23, 2010, and claimed no recorded evidence of claims existed when she signed the Marital Dissolution Agreement in April 2010. The defendants disputed the assertion regarding the transfer of property title in the divorce decree, arguing that CadleRock's statement selectively omitted details from the Marital Dissolution Agreement.

Hillis and Dunlap executed a Marital Dissolution Agreement (MDA) in April 2010, which was not court-approved until August 23, 2010. The MDA awarded Mrs. Dunlap sole title and interest in specific properties in Warren County, Tennessee, effectively divesting Mr. Hillis of any interest in those properties. The court found that defendants did not raise a genuine issue of material fact regarding CadleRock’s claim that its judgment lien had priority over Mr. Hillis’ property transfer to Ms. Dunlap. The court's decree, rather than the MDA, was the instrument that divested Mr. Hillis of his property interest. Mr. Hillis' transfer of interest became effective on August 23, 2010, and was not enforceable against third parties until recorded on December 28, 2010. CadleRock's judgment lien, recorded on June 15, 2010, had priority because Mr. Hillis was the property owner at that time. Defendants argued that CadleRock's lien was ineffective due to a lack of recorded interest by Mr. Hillis prior to December 28, 2010; however, the court held that inheritance does not require a recorded instrument for the lien to attach. Finally, defendants contended that the appeal was not from a final judgment since Ms. Dunlap's cross-claim was unresolved, but the court found that the November 14, 2011 order was final for appeal purposes. The trial court's judgment was affirmed.