                IN THE COURT OF APPEALS OF TENNESSEE
                           AT KNOXVILLE
                          Assigned on Briefs January 4, 2011

      ROBERT E. DAVIS ET AL. v. CRAWFORD L. WILLIAMS ET AL.

                 Appeal from the Chancery Court for Loudon County
                  No. 11472     Frank V. Williams, III, Chancellor


               No. E2010-01139-COA-R3-CV - Filed January 31, 2011


Robert E. Davis and wife, Angela K. Davis (“the Buyers”), filed this action against Crawford
L. Williams and wife, Betty Jo Williams (“the Sellers”), to enjoin them from taking
possession of real property that the Sellers had sold the Buyers and re-acquired through
foreclosure. The Buyers also sought to set aside the foreclosure sale. The Sellers moved to
dismiss and then for summary judgment on the ground that a final judgment against the
Buyers in an unlawful detainer action in general sessions court barred the present action
under principles of res judicata and collateral estoppel. The trial court granted summary
judgment in favor of the Sellers. The Buyers appeal. We affirm.

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

C HARLES D. S USANO, J R., J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.

Terry G. Vann, Lenoir City, Tennessee, for the appellants, Robert E. Davis and Angela K.
Davis.

G. Scott Green, Knoxville, Tennessee, for the appellees, Crawford L. Williams and Betty Jo
Williams.

                                        OPINION

                                             I.

       On or about April 7, 2008, the Buyers purchased a parcel of real property from the
Sellers. The Buyers executed a note to the Sellers in the amount of $73,000 that obligated
them to make payments of $400 per month beginning May 7, 2008. The note was secured
by a deed of trust in favor of the Sellers.

       The Buyers failed to make the payments called for in the note, and the Sellers
foreclosed. The property was sold at auction and the Sellers re-purchased the property by
submitting the highest bid. On April 20, 2009, the Sellers filed an unlawful detainer action
against the Buyers claiming the right to possession by “foreclosure on 4/6/09.” The Buyers
appeared with counsel and agreed to a judgment of possession in favor of the Sellers and
against the Buyers on May 21, 2009. The judgment became final on June 1, 2009, when the
Buyers failed to appeal to circuit court.1

         On June 2, 2009, the Buyers filed this action asking that the foreclosure be set aside
and declared a nullity and that the Sellers be temporarily restrained and ultimately enjoined
from evicting the Buyers. The Buyers alleged that the note and deed of trust that they signed
were incorrect as to the amount owed and did not give them credit for bartered property
which, by agreement of the parties, covered the first fifteen payments2 . The Buyers claimed
that, with the credits, they were not in default of their obligations. The Buyers alleged that
“when [the Buyers] received notice of foreclosure, they spoke with [the Sellers] and
reminded them that no payment was due until August 2009 [,well later than the foreclosure,]
and that [the Sellers] refused to honor the contract and their agreement, and fraudulently
proceeded with the foreclosure even though [the Buyers] were not delinquent.”
         The Buyers secured a temporary restraining order ex parte which, after hearing, was
converted into a temporary injunction. The Sellers then moved the court to dismiss on the
ground that the present action is barred by the doctrine of res judicata and collateral estoppel
as well as the statute of frauds. The trial court declined to rule on the motion to dismiss
because of the court’s concern that it invoked materials outside the pleadings. The Sellers
later filed a motion for the summary judgment asserting that the action is barred under “the
doctrines of res judicata and collateral estoppel” by the judgment rendered in general
sessions court, as well as the statute of frauds for lack of a writing to support the Buyer’s
claims.

        The trial court granted the Sellers summary judgment upon finding “the present action
is barred by the doctrines of res judicata and collateral estoppel.” The court, however, stayed
dissolution of the temporary injunction pending exhaustion of appeals conditioned upon the


        1
            See Tenn. Code Ann. § 27-5-108 (Supp. 2010).
        2
          In opposition to the Sellers’ motion for summary judgment, the Buyers filed the affidavit of the
Sellers’ real estate agent. The agent’s affidavit fully supports the Buyers’ allegations concerning bartered
property and payment credits.

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Buyers making payments of $400, corresponding to the note payments, into the registry of
the court.

                                              II.

       The Buyer filed a timely notice of appeal. The issue is whether the judgment rendered
by the general sessions court in the unlawful detainer action can be given res judicata effect
to preclude the present action when the fraud alleged in this present action could only have
been raised in the general sessions court as a defense to possession and not as an original
claim to set aside the foreclosure sale.

                                             III.

      The general principles that we observe in reviewing a judgment based on res judicata
and collateral estoppel are as follows:

              A trial court’s decision that a lawsuit is barred by principles of
              res judicata presents a question of law which this court reviews
              de novo. In re Estate of Boote, 198 S.W.3d 699, 719 (Tenn. Ct.
              App. 2005).

              Generally, res judicata bars a second law suit between the same
              parties or their privies on the same cause of action with respect
              to all issues that were or could have been litigated in the former
              suit. State v. Thompson, 285 S.W.3d 840, 848 (Tenn. 2009)
              (citing Massengill v. Scott, 738 S.W.2d 629 (Tenn. 1987)).
              Collateral estoppel operates to bar a second suit between the
              same parties and their privies on a different cause of action only
              as to issues which were actually litigated and determined in the
              former suit. Id.

Grant v. Foreperson For Bradley County Grand Jury, No. E2009-01450-COA-R3-CV,
2010 WL 844912, at *3 (Tenn. Ct. App. E.S., filed March 11, 2010)(heading omitted).

                                             IV.

       We begin by noting that the parties have made some concessions that help us to
narrow the issue to the one stated above. The Sellers conceded in the trial court “that the
General Sessions Court for Loudon County does not have jurisdiction to entertain the
question of title [acquired through the foreclosure].” The Sellers maintain, though, that since

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wrongful or fraudulent foreclosure could have been raised as a defense in the unlawful
detainer action, but was not, it cannot now be the basis of a new action. The Buyers concede
that they “could have asserted a defense of wrongful foreclosure; however, as in
[CitiFinancial Mortgage Company, Inc. v. Beasley, No. W2006-00386-COA-R3-CV, 2007
WL 77289 (Tenn. Ct. App. W.S., filed Jan. 11, 2007)], [the Buyers] did not.” The Buyers
maintain that even though the general sessions court could have denied the Sellers possession
based on the defense of wrongful possession, its inability to set aside the foreclosure and vest
title in them rather than the Sellers means that its judgment does not have preclusive effect.

       We disagree with the Buyers. The courts of this state have consistently applied the
doctrine of res judicata “to protect individuals from the burden of litigating multiple
lawsuits, to promote judicial economy, and to promote the policy favoring reliance on final
judgments by minimizing the possibility of inconsistent decisions.” Gerber v. Holcomb, 219
S.W.3d 914, 918 (Tenn. Ct. App. 2006).

                  It is a fundamental principle of jurisprudence that material facts
                  or questions, which were in issue in a former action, and were
                  there admitted or judicially determined, are conclusively settled
                  by a judgment rendered therein, and that such facts or questions
                  becomes res judicata and may not again be litigated in a
                  subsequent action between the same parties or their privies,
                  regardless of the form the issue may take in the subsequent
                  action whether the subsequent action involves the same or a
                  different form or proceedings, or whether the second action is
                  upon the same or a different cause of action, subject matter,
                  claim, or demand, as the earlier action. In such cases, it is also
                  immaterial that the two actions are based on different grounds,
                  or tried on different theories, or instituted for different purposes,
                  and seek different relief . . . .

Id. at 919 (quoting Cotton v. Underwood, 223 Tenn. 122, 442 S.W.2d 632, 635 (1969)).
Gerber involved a second action by attorney Gerber to collect amounts that had accrued on
a note made to him by his client, Dr. Holcomb, in addition to amounts that were included in
a judgment in a prior action.3 After agreeing to a consent judgment in the first action, Dr.
Holcomb attempted to defend the second action by raising affirmative defenses, including
fraud, that he had not raised in the first action. Id. We specifically held that the judgment
in the first action barred Dr. Holcomb from raising the affirmative defenses in the second
action.

       3
           Apparently the note did not allow acceleration of the full amount of the loan upon default.

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               The affirmative defenses raised by Dr. Holcomb in the second
               proceeding attacked the validity of the promissory note and were
               readily available to Dr. Holcomb in the first proceeding.
               However, Dr. Holcomb chose, for whatever reason, not to
               pursue those defenses at that time. In failing to raise these
               matters which could have been litigated and decided as an
               incident to or essentially connected with the subject matter of
               the prior litigation, Dr. Holcomb forfeited his opportunity to
               assert these defenses under the doctrine of res judicata. It is
               inconsequential that the first suit was settled by a consent
               judgment rather than a trial on the merits since it is well settled
               that a judgment by consent in an action in which the court had
               jurisdiction of the subject-matter and of the parties is res
               adjudicata, and conclusive between the parties and those
               deriving under them, and will bind them and those claiming
               under them as efficaciously as if it had been entered after a trial
               of the issues. The doctrine of res judicata only requires that
               there be a full and fair opportunity to litigate all issues arising
               out of the claim, however, every applicable issue need not be
               actually litigated in order for res judicata to apply.

Id. at 918 (emphasis in original, citations and internal quotation marks omitted).

        There is absolutely no doubt that wrongful foreclosure can be raised as an affirmative
defense to an unlawful detainer action brought by the purchaser of property in foreclosure.
Beasely, 2007 WL 77289 at *6-7; Federal Nat’l Mortgage Ass’n v. Robilio, No. W2007-
01758-COA-R3-CV, 2008 WL 2502114 at *5 (Tenn. Ct. App. W.S., filed June 24, 2008).
“Where title bears directly upon the right of possession . . . a party may legitimately interpose
the issue.” Beasely, 2007 WL 77289 at *6. It is the purchaser’s “constructive entry” onto
the premises through the title obtained in foreclosure that “provides the basis for maintaining
the unlawful detainer action.” Id. at *7.

        When the holding in Gerber is examined with reference to the holding in Beasely, it
is inescapable that even though fraud in the foreclosure was not raised as a defense in the
unlawful detainer action, it was conclusively determined not to exist. “In failing to raise
these matters [concerning fraud in the foreclosure] which could have been litigated and
decided as an incident to or essentially connected with the subject matter of the prior
litigation, [the Buyers] forfeited [their] opportunity to assert [fraud] under the doctrine of res
judicata.” Gerber, 219 S.W.3d at 918.



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        We reach the same result by examining the four elements of res judicata.

                To obtain dismissal based on res judicata, the party asserting the
                defense must show that: (1) a court of competent jurisdiction
                rendered the underlying judgment; (2) the same parties or their
                privies were involved in both proceedings; (3) both proceedings
                involved the same cause of action; and (4) the underlying
                judgment was final and on the merits.

Roberts v. Vaughn, W2008-01126-COA-R3-CV, 2009 WL 1608981, at *3 (Tenn. Ct. App.
W.S., filed June 10, 2009). The parties are the same and the underlying judgment in the
detainer action is final. The Buyers argue about the general sessions court’s jurisdiction, but,
as we have illustrated above, it had subject matter jurisdiction of the detainer action. It was
competent in the detainer action to consider title as a challenge to the Sellers’ right to
possession. The Buyers understandably argue that the cause of action in the present action
is not the same as in the detainer action. However, the Tennessee Supreme Court has
recently redefined the term “cause of action” broad enough to connect the detainer action and
the present action. Id. at 5 (quoting Creech v. Addington, --- S.W.3d ----, No.
E2006-01911-SC-R11-CV, 2009 WL 838102, at *14 (Tenn. 2009)(“Two suits, therefore,
shall be deemed the same ‘cause of action’ for purposes of res judicata where they arise out
of the same transaction or a series of connected transactions.” )). There can be no doubt that
the detainer action and the present action both arose out of the same transaction or series of
connected transactions.

         Before concluding, we think it worthwhile to note that all of the fraud alleged by the
Buyers occurred well before the entry of the judgment in the detainer action. Accordingly,
this is not a case that falls within Tenn. R. Civ. P. 60.02(2) and the Buyers do not assert Rule
60 as a basis for relief. The alleged fraud is in the Sellers’ preparation and presentation of
documents that varied from the negotiated terms of sale,4 and subsequent refusal in the
process of foreclosure to acknowledge the true terms of the sale. As to any and all other
challenges to the judgment asserted by the Buyers, directly or indirectly, we have considered
them and find them to be without merit. We hold that there was no error by the trial court


        4
         We have repeatedly held that a party who signs a document cannot later base an action for fraud on
claims that the document does not accurately state the agreement of the parties. See Moody Realty Co., Inc.
v. Huestis, 237 S.W.3d 666, 676-77 (Tenn. Ct. App. 2007); Overton v. Lowe, E2007-00843-COA-R3-CV,
2009 WL 1871946 at *10-11 (Tenn. Ct. App. E.S., filed June 30, 2009) ( quoting Solomon v. First
American National Bank, 774 S.W.2d 935, 943 (Tenn. Ct. App. 1989)); Lee v. Stanfield, No.
E2008-02168-COA-R3-CV, 2009 WL 4250155, at *8 (Tenn. Ct. App. E.S., filed Nov. 30, 2009).


                                                   -6-
in granting summary judgment because the Sellers were entitled to judgment as a matter of
law.

                                           V.

       The judgment of the trial court is affirmed. Costs on appeal are taxed to the
appellants, Crawford L. Williams and Betty Jo Williams. This case is remanded, pursuant to
applicable law, for collection of costs assessed below.


                                                 _______________________________
                                                 CHARLES D. SUSANO, JR., JUDGE




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