                    IN THE COURT OF APPEALS OF TENNESSEE
                                 AT JACKSON
                                          MARCH 2000 Session

                 B & H INVESTMENTS, INC. v. JAMES W. BROOKS

                   Direct Appeal from the Chancery Court for Madison County
                       No. 54697; The Honorable Joe C. Morris, Chancellor



                                      No. W1999-01252-COA-R3-CV


This appeal arises from a dispute regarding whether Plaintiff B& H was entitled to a deficiency
judgment following a foreclosure sale of Defendants’ property. Despite Defendant Brooks’ counter-
claim of fraud in the sale, the court found that Plaintiff was entitled to a deficiency judgment.
Defendant Brooks’ motion for new trial or for an amendment of the findings of fact was denied.
Brooks appeals this denial.

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

ALAN E. HIGHERS , J., delivered the opinion of the court, in which FARMER , J., and LILLARD , J.,
joined.

James Brook, Brownsville, pro se

Jesse H. Ford, III, Jackson, for Appellee


                                                    OPINION

                                        Facts and Procedural History

       In January 1997, Defendant Delk (“Delk”) signed a note in favor of B&H. The note was for
approximately twenty thousand dollars; the money was used to purchase property from Brooks. At
B&H’s request, Brooks signed a guaranty to secure the note. At some point over the next year, Delk
defaulted on the note. Pursuant to a contractual power of sale, B&H held a foreclosure sale on the
property. Brooks did not receive notice of the sale. At the foreclosure sale, B&H purchased the
property for six thousand dollars.1



       1
           According to Brooks, B& H subsequ ently resold the prop erty for eighteen tho usand dollars.
        Following the sale, B&H filed an action in the Madison County Chancery Court seeking a
deficiency judgment for approximately seventeen thousand dollars. Both Delk2 and Brooks were
named defendants in this action. A preliminary hearing on the matter was held on July 20, 1998.
At this hearing, a witness for B&H testified about the existence of the note and the deficiency. At
this point, Brooks filed a counterclaim against B&H, alleging the foreclosure sale was fraudulent and
the guaranty was not constitutional.

        Trial on both the original complaint and the counter-claim was held on January 29, 1999.3
The Chancellor entered his findings on February 3, holding that Brooks was liable for the amount
of the deficiency judgment as guarantor of the note. In addition, Brooks’ counterclaim was
dismissed because Brooks failed to put on proof of B&H’s alleged fraudulent conduct. Thereafter,
Brooks filed a Motion for New Trial or in the alternative an Amendment to the Findings of the
Court. Brooks’ motion claimed that B&H acted fraudulently in purchasing the property for six
thousand dollars, well below its actual value. Brooks also asserted that he was not allowed to call
witnesses or cross-examine B&H’s witnesses. In addition, Brooks claimed that he was not allowed
to present evidence regarding the constitutionality of the note and guaranty.

        A final order incorporating the court’s findings was entered on March 12, 1999. The trial
court also denied Brooks’ motion. Brooks appeals.

       On appeal, Brooks asserts that B&H was not entitled to a deficiency judgment because the
foreclosure sale was held without proper notice and the property was sold for an amount well below
the market value. In addition, Brooks claims that the trial court abused its discretion in failing to
grant Brooks’ motion for new trial.

       B&H asserts that Brooks’ appeal is a frivolous pursuant to Tenn. Code. Ann. § 27-1-122 and
requests damages.

                                                    Analysis

        As a preliminary matter, we find it necessary to address Brooks’ claim that he was not
allowed to present testimony or cross-examine B&H’s witness. Unfortunately for Brooks, there is
no transcript in the record, only a Statement of the Evidence. The Statement of Evidence does not
make reference either to Brooks’ attempt to present new evidence or to cross-examine. In addition,
Brooks did not make an offer of proof that would preserve either the existence or the content of any
excluded evidence. Without either a statement of the substance of the evidence or an offer of proof,
the issue as to the propriety of the excluded evidence is not reviewable on appeal. Rule 103(a)(2)

        2
           A default judgment for the amount of the deficiency judgment was entered against Delk on March 31, 1999.
He is not a party to this a ppeal.
        3
         Apparently, no transcript of the trial proceedings is available. Instead, this Court was provided with a
Statement of Evid ence pu rsuant to R ule 24 of the Tennessee Rules of Appellate Procedure. See Rule 24(c) T ENN. R.
A PP. P.

                                                        -2-
T.R.E.; Rutherford v. Rutherford, 971 S.W.2d 955, at 956 (Tenn. Ct. App. 1997) citing
Farmers-Peoples Bank v. Clemmer, 519 S.W.2d 801, at 804 (Tenn.1975). Accordingly, Brooks
cannot prevail on this issue. We now turn to the remaining issues on appeal.


                                               A. The Foreclosure Sale

        Brooks asserts B&H acted fraudulently in carrying out the foreclosure sale. Brooks claims
that he was entitled to notice of the sale which he did not receive. In addition, Brooks claims that
B&H acted improperly in purchasing the property for an amount well below the market value. Based
upon the following, we find that B&H did not act improperly or fraudulently in carrying out the
foreclosure sale.

         Brooks relies on his failure to receive notice of the sale and the low selling price to prove
B&H’s fraudulent intent. However, pursuant to the guarantor agreement, Brooks expressly waived
any right to notice.4 Brooks failed to present any other evidence indicating the foreclosure sale was
illegal or improper. While ideally, property should bring its fair market value at a foreclosure sale,
the mere inadequacy of proceeds obtained as a result of a foreclosure sale will not invalidate the sale.
“If a foreclosure sale is legally held, conducted and consummated, there must be some evidence of
irregularity, misconduct, fraud, or unfairness on the part of the trustee or the mortgagee that caused
or contributed to an inadequate price, for a court of equity to set aside the sale.” Holt v. Citizens
Central Bank, 688 S.W.2d 414, at 416 (Tenn. 1984).

       When the proceeds of the foreclosure sale equal or exceed the debt and related costs, the
proceeds extinguish the mortgage debt. Accordingly, a mortgagee who bids in the full amount of
the debt at the foreclosure sale accepts the property itself in full payment of the underlying debt,
while a mortgagee who bids in less than the full amount of the debt retains its status as a creditor
with regard to the deficiency. First Inv. Co. v. Allstate Ins. Co., 917 S.W.2d 229, at 231 (Tenn. Ct.
App. 1994). In this case, B&H retained its status as creditor for the amount not covered by the
foreclosure sale proceedings.



                                    B. Amount of the Deficiency Judgment

        In the alternative, Brooks requests a reduction in the amount of the deficiency judgment to
prevent a windfall to B&H. Brooks bases this claim on his allegation that B&H subsequently resold
the property for eighteen thousand dollars and that the award of a deficiency judgment for more than


         4
           The guaran ty agreement signed by Brooks provides: “The liability of the Undersigned shall not be affected
or impaired by any of the following acts or things (which Lender is expressly authorized to do, omit or suffer from time
to time, both be fore and after revoc ation of this g uaranty , without notice to or approval by the Und ersigned ):...(vii) any
foreclosu re or enfo rcemen t of any co llateral security ...”

                                                              -3-
sixteen thousand dollars would in effect allow a double recovery to B&H. Brooks asserts that the
resale of the property reduces the amount of any deficiency recoverable by B&H. After a review of
the record, we find that this issue cannot be disposed of without further proceedings in the court
below.

        It is a well-recognized principle that a creditor's right to a deficiency is a matter of legal right
upon the contract freely entered into by the parties. The creditor will be allowed to recoup a
deficiency unless there is bad faith or fraud in connection with the foreclosure. McDill Columbus
Corp. v. Lakes Corp., No. 03A01-9112CV00445, 1992 WL 115576, at *1 (Tenn. Ct. App. July 1,
1992) citing Brown v. P'Pool, 166 S.W.2d 633, 635 (Tenn. 1942). However, the court disfavors
deficiency judgments when the party has been made whole, and seeks a windfall. Union Joint Stock
Land Bank of Louisville v. Knox County, 97 S.W.2d 842, at 846 (Tenn. Ct. App. 1936)

        As previously noted, this Court was provided with only a Statement of the Evidence, not a
full transcript of the proceedings below. As such, our review is limited to what appears in the
technical record and the Statement of Evidence. In this case, the Statement of Evidence mentions
Brooks’ allegation, it does not state whether or not the property was actually resold. The technical
record does, however, contain B&H’s unsigned response to Brooks’ request for admissions. This
response indicates that the property was resold for eighteen thousand dollars. However, pursuant
to Rule 26.07 of the Tennessee Rules of Civil Procedure, an unsigned admission is stricken.5

        Based on the foregoing, we find that there is an issue of fact as to whether or not the property
was actually resold and if so, for what amount. Accordingly, this issue is remanded to the trial court
for a determination of this fact.


                                                 C. Frivolous Appeal




         5
           Rule 26.07 of T ENN. R. C IV. P. provides in relevant part: Every request for discovery or response or objection
thereto m ade by a party represented by an attorney shall be signed by at least one attorney of record in the attorn ey's
individual name, whose address shall be stated. A party who is not repres ented by an attorne y shall sign th e request,
response, or objection and state the party's address. The signature of the attorney or party constitutes a certification that
the attorney or party has read the requ est, response, or objection, and that to the best of that person's knowledge,
information and belief formed after a reasonable inquiry it is: (1) consistent with these rules and warranted by existing
law or a good faith argument for the extension, mo dification or reversal of existing law; (2) not interposed for any
improper purpose, such as to harass or to cause unnecessary delay or need less increase in the cost of litigation; and, (3)
not unreasonable or unduly burdensome or expensive, given the needs of the case, the discover y already had in the case,
the amount in controversy, and the importance of the issues at stake in the litigation. If a request, response, or objection
is not signed, it shall be stricken unless it is signed promptly after the omission is called to the attentio n of the pa rty
making the reque st, response or objectio n and a party sha ll not be ob ligated to ta ke any a ction with respect to it un til
it is signed. (emphasis added).




                                                             -4-
       When an appeal has no basis in law or fact it is considered frivolous. See Industrial Dev. Bd.
of City of Tullahoma v. Hancock, 901 S.W.2d 382, 385 (Tenn. Ct. App. 1995). Accordingly,
Appellees “should not have to bear the expense and vexation” of a frivolous appeal. Davis v. Gulf
Ins. Group, 546 S.W.2d 583, 586 (Tenn. 1977); Tenn. Code Ann. § 27-1-222.6 Based on the
standard above, B&H asserts that Brooks’ appeal is frivolous and devoid of merit and requests
damages and attorneys’ fees incurred on appeal. Since we find that Brooks’ appeal is not frivolous,
we hereby deny B&H’s requests.

                                                     Conclusion

        For the foregoing reasons, the decision of the trial court is hereby affirmed in part and
remanded in part. Costs of appeal are taxed one-half to Appellant, James W. Brooks, and one-
half to Appellee, B&H Investments, Inc., for which execution may issue, if necessary.



                                                                 ___________________________________
                                                                 ALAN E. HIGHERS, JUDGE




         6
           Tenn. Code Ann. § 27-1-122 provides: “When it appears to any reviewing court that the appeal from any
court of record was frivolous or taken solely for delay, the court may, either upon motion of a party or its own motion,
award just damages against the appellant, which may include but need not be limited to, costs, interest o n the judg ment,
and exp enses incu rred by th e appellee as a result of th e appea l.”

                                                           -5-
