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IN THE COURT OF APPEALS OF TENNESSEE AT JACKSON
MAY 23, 2007 Session CHARLES AND ANN HALFORD v. HAROLD R. GUNN
Direct Appeal from the Circuit Court for Gibson County (Humboldt) No. H-3587 Allen Wallace, Judge

No. W2006-02528-COA-R3-CV - Filed August 22, 2007

The plaintiff-buyers entered into an installment sales contract in 1991 in which they agreed to purchase real property owned by the defendant-seller. The contract provided that upon the plaintiffs' payment of the purchase price, the defendant would provide a deed conveying the property to them free of encumbrances. In 2002, a general sessions judgment was entered against the defendant in an unrelated case, and the defendant appealed that judgment to the circuit court, where that case currently remains pending. The judgment was filed as a lien on the real property in 2002. In late 2004 or early 2005, the plaintiffs had made all necessary payments on the real property, and the defendant conveyed the property to them by warranty deed. While attempting to sell the real property in 2005, the plaintiffs discovered the existence of the 2002 judgment lien on the property, and they placed funds in escrow in order to satisfy their intended purchaser that the lien would be removed or paid. The plaintiffs filed a warrant in general sessions court against the defendant, alleging that he was liable for breach of the covenant against encumbrances contained in the warranty deed. The general sessions court entered judgment in favor of the plaintiffs, and the defendant appealed to the circuit court. The plaintiffs filed a motion for summary judgment and sought an award of reasonable attorney's fees. The circuit court granted the motion for summary judgment, but denied the plaintiffs' request for attorney's fees. On appeal, we affirm in part, reverse in part, and remand for a determination of reasonable attorney's fees incurred below and on appeal.

Tenn. R. App. P. 3; Appeal as of Right; Judgment of the Circuit Court Affirmed in Part, Reversed in Part and Remanded ALAN E. HIGHERS , J., delivered the opinion of the court, in which DAVID R. FARMER , J., and HOLLY M. KIRBY , J., joined. Harold R. Gunn, Humboldt, TN, pro se David A. Riddick, Jackson, TN, for Appellees OPINION

I. FACTS & PROCEDURAL HISTORY The plaintiff-purchasers, Charles and Ann Halford ("the Halfords" or "Appellees"), and the defendant-seller, Harold Gunn ("Appellant"), entered into an installment sales land contract on January 18, 1991, by which the Halfords agreed to purchase real estate owned by Mr. Gunn and located in Gibson County, Tennessee ("the subject property"). The contract provided in part: The seller hereby agrees that when the said purchase price and all other amount to be paid to seller, are fully paid as herein provided, he will execute and deliver to the buyer a good and sufficient deed conveying said real property free and clear of all encumbrances made, or suffered by the seller. In late 2004 or early 2005, Mr. Gunn accepted the last installment payment from the Halfords, and he and his wife conveyed the subject property to them by warranty deed which was recorded on January 11, 2005. The deed provided in part: We covenant with the said Grantees, their heirs and assigns, that we are lawfully seized and possessed of said described property; that the same is unencumbered and that therefore, we have a good and lawful right to make this conveyance. ... We further covenant, binding ourselves, our heirs and our representatives, to forever warrant and defend the title to the above described property, unto the said Grantees, their heirs and assigns, against the lawful claims of all persons whomsoever. In a previous action, to which the Halfords were not parties, a judgment was entered in Hardeman County General Sessions Court on December 3, 2002, in favor of Grand Valley Lakes Property Owners' Association against Mr. Gunn in the amount of $3,582.49, plus costs and interest. This judgment was filed as a lien on the subject property in the Gibson County Register's Office on December 10, 2002. Mr. Gunn appealed the judgment to the Hardeman County Circuit Court on December 12, 2002, where, apparently, the case currently remains unheard on the circuit court docket. After obtaining title to the subject property, the Halfords, who desired to sell the property, discovered the 2002 judgment lien that had been filed in Gibson County that encumbered the subject property, the amount of which was $4,853.81, including court costs and accrued interest through November 1, 2005. In the process of selling the property, the Halfords placed $8,000 in escrow as an assurance to the buyer that the lien would be removed or paid. The Halfords filed a warrant in Gibson County General Sessions Court on December 13, 2005, against Mr. Gunn for breach of the covenant against encumbrances in the warranty deed. On March 31, 2006, the general sessions court entered judgment in favor of the Halfords.

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Mr. Gunn appealed the general sessions judgment to the circuit court. The Halfords filed a motion for summary judgment, requesting judgment in the amount of $4,853.91, plus accrued interest on the 2002 judgment, attorney's fees, and costs. In its memorandum and order entered on November 6, 2006, the trial court set forth the following material undisputed facts: 1) A judgement was entered against the defendant by the General Sessions Court of Hardeman County on December 3, 2002; Defendant filed an appeal to the Circuit Court of Hardeman County on December 12, 2002; The General Sessions judgement was filed as a lien in Gibson County on December 10, 2002; No action has been taken by the defendant to prosecute his appeal in the Circuit Court of Hardeman County since the appeal was taken; The filing of such judgement in Gibson County constitutes a cloud upon the title of defendant's real property in Gibson County; No action has been taken by defendant to remove such cloud from the title of his property; On January 18, 1991, the parties entered into an installment land sales contract, and on December 22, 2004, defendant issued a warranty deed to the plaintiffs, free and clear of any liens or encumbrances; and Plaintiffs then sold the property and the closing attorney then discovered the judgement lien, and plaintiffs then were forced to escrow the amount of the judgment lien of $4853.81 in order to convey the property.

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The trial court granted the Halfords' motion for summary judgment, and entered judgment on January 22, 2007, in favor of the Halfords for $4,853.81, plus interest accrued from November 1, 2005. The court denied the Halfords' request for an award of attorney's fees, but assessed costs against Mr. Gunn. Mr. Gunn filed a timely notice of appeal.

II. ISSUES PRESENTED The issues before this Court on appeal, as presented by the parties, are as follows:

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1. Whether a lien, corresponding to a judgment of a general sessions court, is extinguished by the appeal of the general sessions judgment to the circuit court. 2. Whether the Halfords are entitled to an award of reasonable attorney's fees incurred below and on appeal. For the following reasons, we affirm in part, reverse in part, and remand for further proceedings. III. STANDARD OF REVIEW Rule 56.04 of the Tennessee Rules of Civil Procedure provides that summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law." Our review of the trial court's grant of summary judgment is de novo on the record before this Court, with no presumption of correctness. Warren v. Estate of Kirk, 954 S.W.2d 722, 723 (Tenn. 1997). IV. DISCUSSION It is clear that a valid judgment lien that is attached to the property at the time of a conveyance constitutes an encumbrance for purposes of our analysis. See Weaks v. Gress, 225 Tenn. 593, 598, 474 S.W.2d 424, 426 (Tenn. 1971). A covenant against encumbrances "is one which has for its object security against those rights to, or interests in, the land granted which may subsist in third persons to the diminution in value of the estate although consistent with the passing of fee." Murdock Acceptance Corp. v. Aaron, 190 Tenn. 416, 427, 230 S.W.2d 401, 406 (Tenn. 1950) (citing 21 C.J.S. Covenants

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