Pistey v. Lake Developers Partnership et al (TV3)

MEMORANDUM in Support of Motion re MOTION to Alter Judgment and in the Alternative, for a New Trial Judgment

E.D. Tenn.February 27, 2019

1 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TENNESSEE NORTHEASTERN DIVISION FRANCES H. PISTEY, ) ) Plaintiff, ) ) v. ) No. 2:17-cv-00008-TAV-MCLC ) LAKE DEVELOPERS PARTNERSHIP, ) LAKE DEVELOPERS II, LLC, and ) DAYTONA CONSTRUCTION ) COMPANY, INC., ) ) Defendants. ) DEFENDANT'S MEMORANDUM OF LAW IN SUPPORT OF ITS MOTION TO ALTER OR AMEND THE JUDGMENT AND IN THE ALTERNATIVE FOR A NEW TRIAL Pursuant to Rule 59 of the Federal Rules of Civil Procedure, Lake Developers Partnership ("Lake Developers"), submits this Memorandum of Law in Support of its Motion to Alter or Amend the Judgment and in the alternative for New Trial. I. BACKGROUND AND PROCEDURAL HISTORY Plaintiff purchased an unimproved lot in a neighborhood called Legacy Bay from Lake Developers in 2003. Pl.'s Compl. ¶ 4. The Tennessee Valley Authority ("TVA") now claims that its property has a different boundary from where it had been marked for years. Pl.'s Compl. ¶ 7. The TVA's newly claimed boundary encroaches upon Plaintiff's unimproved residential lot. Pl.'s Compl. ¶ 7. Therefore, Plaintiff was constructively evicted in 2015 when the TVA informed her of its boundary claims thereby invoking the warranty covenant contained in the warranty deed. The facts are not in dispute in this matter and neither is the underlying legal issue, namely that there was a mutual mistake and that rescission is the appropriate remedy. The only dispute Case 2:17-cv-00008-TAV-MCLC Document 41 Filed 02/27/19 Page 1 of 5 PageID #: 349 2 that remained to be tried was the availability of certain damages. Plaintiff paid $143,685 for the unimproved lot in question. She requested $293,467.21 for the same unimproved lot. The Court awarded her the purchase price ($143,685.00), property taxes ($10,167.19), homeowners- association fees ($7,261.00), maintenance costs ($1,300.00), interest paid on the home-equity loan ($90,371.00), closing costs ($839.69), and prejudgment interest on these amounts as appropriate. [ECF Doc. #38.] II. LEGAL ARGUMENT A. The Judgment Should be Altered or Amended or in the Alternative Lake Developers is Entitled to a New Trial. Pursuant to Rule 59 of the Federal Rules of Civil Procedure, the Court may alter or amend a judgment or "After a nonjury trial, the court may, on motion for a new trial, open the judgment if one has been entered, take additional testimony, amend findings of fact and conclusions of law or make new ones, and direct the entry of a new judgment" Fed. R. Civ. P. 59(e); Fed. R. Civ. P. 59(a)(2). Lake Developers is requesting this relief because the standard of law employed by the Court to determine damages in this matter is at odds with the standard espoused by the 6th Circuit Court of Appeals and Tennessee law generally. In Bennett v. CMH Homes, Inc., 661 F. App'x 329, 334 (6th Cir. 2016), the 6th Circuit stated that in a case of rescission involving real property that "'A purchaser ..., upon rescission, is allowed to recover the consideration or purchase price which he paid for the property.'" Isaacs v. Bokor, 566 S.W.2d 532, 538 (Tenn. 1978); see also Simmons v. Evans, 185 Tenn. 282, 206 S.W.2d 295, 297 (1947). Bennett v. CMH Homes, Inc., 661 F. App'x 329, 334 (6th Cir. 2016). Bennett is an unpublished case and is attached hereto as Ex. 1. Case 2:17-cv-00008-TAV-MCLC Document 41 Filed 02/27/19 Page 2 of 5 PageID #: 350 3 Like Plaintiff Pistey in this case, the Plaintiff in Bennett also requested a variety of other damages including mortgage payments/interest. The Court stated that: "We have been presented no authority suggesting that a case involving a mortgage is an exception to this rule. The $1,400 monthly sum is neither the consideration nor the purchase price paid for the house; it is a monthly payment to a third party that contemplates both interest on the mortgage and the price paid for the land on which the defective house sits. The amount of the mortgage payments may also reflect such irrelevant factors as the term of the mortgage loan and the creditworthiness of the borrower. The correct benchmark for damages is instead the purchase price of the house: $109,597.57." Bennett v. CMH Homes, Inc., 661 F. App'x 329, 334 (6th Cir. 2016). This conforms with the standard Lake Developers argued should be applied and is at odds with the standard used by the Court and championed by Plaintiff. Plaintiff is only entitled to the purchase price for said lot, $143,685.00 and potentially pre-judgment interest. The general rule as to the measure of damages for breach of covenants of title is that such damages are based upon the consideration received by the grantor. King v. Anderson, 618 S.W.2d 478, 483 (Tenn. Ct. App. 1980) citing Curtis v. Brannon, 98 Tenn. 153, 38 S.W. 1073 (1896); Kincaid v. Brittain, 37 Tenn. 119 (1857). Plaintiff Pistey, just like the Plaintiff in Bennett, is "not entitled to an award for the interest they paid on their mortgage." Bennett v. CMH Homes, Inc., 661 F. App'x 329, 337 (6th Cir. 2016). If the land was sold in good faith, and without fraud, a seller should not be held to a greater degree of liability than the purchase price. The same limits apply here, whether the Court applies the traditional standard based upon covenants, or as the 6th Circuit did, under the principals of recession. B. Pre-Judgment Interest Lake Developers avers that Final Judgment has not yet been entered in this case due to the inability of the parties to calculate a monetary value that would satisfy the Court's Order [ECF Doc.# 38] and accompanying Memorandum Opinion [ECF Doc.# 39]. Lake Developers Case 2:17-cv-00008-TAV-MCLC Document 41 Filed 02/27/19 Page 3 of 5 PageID #: 351 4 avers that Plaintiff is not entitled to both pre-judgment interest and mortgage interest because it would be paying interest on interest, essentially double-dipping. However, if awarded, the federal interest statute, 28 U.S.C. §1961(a), should be used to calculate said interest. The statute states that the interest rate should be calculated using the weekly average interest rate one week prior to entry of the judgment. 28 U.S.C. §1961(a); Bell v. Prefix, Inc., 2010 WL 4260081, at *2 (E.D. Mich. Oct. 22, 2010). The interest rate for federal judgments is based on the average prices for U.S. Government Securities - Treasury Constant Maturities -1- Year. The Court's Order referenced above was entered in the week ending on February 1, 2019. The weekly average interest rate one week prior to entry of the judgment was 2.58%. Lake Developers respectfully requests that this Court, if it maintains an award of pre- judgment interest, set the interest rate at 2.58%. WHEREFORE, PREMISES CONSIDERED, Lake Developers respectfully requests that the Court alter or amend the judgment and in the alternative grant a new trial and employ the standard espoused by the 6th Circuit Court of Appeals when determining damages and any additional relief the Court deem warranted by the circumstances. Respectfully submitted, /s/ R. Andrew Hutchinson R. Andrew Hutchinson, BPR No. 025473 BAKER, DONELSON, BEARMAN, CALDWELL & BERKOWITZ, P.C. 100 Med Tech Parkway, Suite 200 Johnson City, Tennessee 37604 Phone: (423) 928-0181 dhutchinson@bakerdonelson.com Attorney for Lake Developers Partnership Case 2:17-cv-00008-TAV-MCLC Document 41 Filed 02/27/19 Page 4 of 5 PageID #: 352 5 CERTIFICATE OF SERVICE The undersigned hereby certifies that a true and exact electronic copy of the foregoing has been served upon the following counsel for parties in interest herein through the Court's ECF system. H. Scott Reams Taylor, Reams, Tilson & Harrison P O Box 1799 Morristown, TN 37816-1799 423-586-9302 Fax: 423-581-8067 Email: hsreams@trthatty.com Charles G. Fisher Grant, Konvalinka & Harrison, PC 633 Chestnut Street Suite 900 One Republic Centre Chattanooga, TN 37450 423-756-8400 Email: cfisher@gkhpc.com This 27th day of February, 2019. /s/ R. Andrew Hutchinson Attorney Case 2:17-cv-00008-TAV-MCLC Document 41 Filed 02/27/19 Page 5 of 5 PageID #: 353