ÿWPC— …4Vj 0(y¡w@© 0Jé 0T3 0^‡ 0hå 0rM 0|¿ 0†; 0Á 1uQ U,Æ 0dò UBV %˜ U,ž U6Ê B) DC) AMl U*¹ .ã Bv~.vÓ¬ D3 0@² AOòÆA 0D D/K Bz©U!ÔøÔô3|xå($¡¡ ÑÒDÓÔÕÖרDÙÚÓ€2 ÿÿ0Indent1Ô2ÔÔ3  Ô2" ÿÿ0Indent2à0 àÔ2ÔÔ3  Ô2, ÿÿ0Indent3à0 àà0 àÔ2ÔÔ3  Ô26 ÿÿ0Indent4à0 àà0 àà0 àÔ2ÔÔ3  Ô2@ ÿÿ0Indent5à0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2J ÿÿ0Indent6à0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2T ÿÿ0Indent7à0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô2^ ÿÿ0Indent8à0 àà0 àà0 àà0 àà0 àà0 àà0 àÔ2ÔÔ3  Ô  ÿÿ?AGMSYaioIndent0I.A.1.a.(1)(a)i)a)< Œ 9p`(ModernP ÿÿ8Mac DefaultMac DefaultÓ ` °šXÓ<þ6X9`(*Courier 12pt10cpiX< Œ 9p`(Monaco< Œ 9p`(Courier New% Line 7 d 7Border 1dd€-!Cþÿ << Gÿÿ< Œ 9p`(Arial $Ý ƒ!ÝÑ  ÑÑ#€d#ÑÔ€ÔÔ€ÔÝ  ÝÔ€#ÔÔ€#ÔÓ  ÓÔ YYY ÔFILEDÔ€#XÔÌÌò òAugust€21,€1996ÌÌCecil€Crowson,€Jr.ÌÔ€#ôÔAppellate€Court€Clerkó ó dPtPtHHÚ(ÿáÿâùFG(üHHØ(d'`Styl{WP}01•ÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃÃà Ãà Ãà Ãà Ãà ÃÃÃÃÃÃÃÃÃÃÃÐ ÐÐHHÐÐ  ÐÐ2ÐÐÿÿ¸æ$ÿÐÐHHÐÐÐÐÐÐÐÐ  ÐÐ ÐÐ ÐÑÑÑGenevaÑÑ ÑÑ € ÑÑ<Px–ÈÑÒÒÒ443!#4ÒÒ$ *$ÒÒ$*$ÒÒ ÿKK ÒÒ  Geneva ÒÒ  Geneva ÒÓ.,ÓÓÓÓ6ÓÓ ÓßßßßßßßßßßßßßßßßßßÑMonacoÑÑ ÑÒ  BA Op Monaco ÒÒ  BA Op Monaco Ò%%%%'ÿÿdxd("ÿÿ$££Ò  ÒÒ  Ò€-‚ƒCþÿ<< CÿÿƒLevel 1Level 2Level 3Level 4Level 5($$””ò òÚ  Ú1Ú  Úó ó„„'÷ÿ dxdüÿP PdÝ ƒ!ÝÔ . ÔÔ€ÔÓ&€X„d&ÓÑ#€Xd#ÑÔ€ÔÝ  ÝÑ  ÑÒ Ü ÒÒ ° ÒÑ ý ÑÑ\R AØ'\ÑÑ\R AØ'\ÑÑ7€¿íXXdÈdÈ7ÑÙ€€ÙßL€"$!;+'h|` ¤ `€€Lß›€€€€à@ àò òIN€THE€COURT€OFÏAPPEALS€OF€TENNESSEEÌÌà@ àEASTERN€SECTIONÌó óÌÌÌÌÌGREENE€COUNTY€BANK,à àà àà à)€C/A€NO.€03A01„9604„CH„00124Ìà àà àà àà àà àà à)Ìà àPlaintiff„Appellee,à àà à)€BLOUNT€CHANCERYÌà àà àà àà àà àà à)Ìv.à àà àà àà àà àà à)€HON.€DENNIS€H.€INMAN,Ìà àà àà àà àà àà à)€CHANCELLORÌSOUTHEASTERN€PROPERTIES,€INC.,)€(SITTING€BY€INTERCHANGE)Ìet€al.,à àà àà àà àà à)Ìà àà àà àà àà àà àœ)€AFFIRMED€AS›Ìà àDefendants„Appellants.à àœ)€MODIFIED›ÌÌÌÌÌKENNETH€CLARK€HOOD,€ROGERS,€LAUGHLIN,€NUNNALLY,€HOOD€&€CRUM,ÏGreeneville,€for€Plaintiff„Appellee.ÌÌL.€LEE€KULL,€BIRD,€NAVRATIL,€KUILL€&€McCROSKEY,€Maryville,€forÏDefendants„Appellants.à@ àòòÌÓÓóóÌÌÌà@ àò òòòO€P€I€N€I€O€Nóóó óÌÌÌà àà àà àà àà àà àà àà àFranks.€J.ÌÌÌà àà àIn€this€action€œin€debt,›€the€Chancellor€enteredÍjudgment€against€defendants€for€the€deficiency€and€pre„judgmentÏinterest.Ìà àà àDefendants€have€appealed.€€Appellants,€Kings,€were€inÏdefault€on€loans€made€by€Greene€County€Bank€(Bank).€€The€BankÏgave€the€Kings€time€to€execute€a€plan€to€sell€several€propertiesÏsecured€by€the€loans€and€complete€their€sub„division€project,€LaÏVista.€€The€plan€was€not€carried€out.Ìà àà àIn€order€to€avoid€foreclosure,€the€Kings€enteredÏanother€agreement€with€the€Bank€wherein€the€Bank€would€marketÏthe€secured€properties€and€apply€the€proceeds€to€theÏœindebtedness.€€Upon›€the€properties€being€deeded€to€the€œBank,€›€Ïœthe›€properties€were€sold,€leaving€a€deficiency.€Ìà àà àThe€Chancellor€determined€that€while€the€Bank€had€theÏburden€of€proving€the€amount€of€the€deficiency,€the€defendantsÏhad€the€burden€of€proving€that€the€Bank€did€not€pursue€the€œsaleÏdiligently›€or€in€good€faith€according€to€the€terms€of€theÏcontract.€€He€found€that€the€defendants€did€not€carry€the€burdenÏof€proving€the€Bank€failed€to€exercise€good€faith€and€diligence,Ïœbut›€refused€to€award€attorneys€fees.Ìà àà àAppellants€argue€that€the€intent€of€the€contract€wasÏto€establish€a€trust.€€Under€this€interpretation,€the€Bank€wouldÏowe€appellants€a€higher€duty,€due€to€its€fiduciary€relationship.€ÍThe€issue€was€not€raised€in€œthe€Kingsðð›€answer€or€at€œtrial,€and›Ïœwill›€not€œbe€considered€on›€appeal.€€In€their€reply€brief,€theÏKings€argue€œthey›€did€not€ask€the€Court€to€impose€a€trustÏagreement,€but€assert€that€the€Bank€breached€the€expressÏcovenant€of€ð ðgood€faith€and€diligenceð ð.€€à àà àThe€issue€ofÏfailure€to€exercise€good€faith€and€diligence€is€an€affirmativeÏdefense€to€the€deficiency€action,€and€the€burden€of€proof€for€anÏaffirmative€defense€is€placed€upon€the€party€which€raised€it.€ÏòòAssociation€of€Owners€of€Regency€Park€Condominiums€v.€Thomassonóó,Ï878€S.W.2d€560€(Tenn.App.€1994).€Ìà àà àThe€issue€thus€becomes€did€the€Bank€œfulfill›€itsÏcontractual€agreement€to€exercise€good€faith€and€diligence€inÏthe€sale€of€the€properties.€€The€contract€reads€in€pertinentÏpart:€€ÌÓÓà0 àà0 àAfter€execution,€acknowledgment€and€delivery€of€saidÏdeed€from€the€Borrowers€to€the€Lender,€Greene€CountyÏBank,€the€Lender€shall€then€apply€the€net€proceeds€ofÏsaid€sale€or€sales,€after€payment€of€all€saleÏexpenses,€including€but€not€limited€to,€payment€of€allÏindebtedness€related€to€prior€encumbrances€.€.€.Ï[l]ender€hereby€agrees€to€exercise€òògood€faith€andÏdiligenceóó€in€marketing€for€sale€and€selling€saidÏproperties€which€are€being€transferred€unto€the€LenderÏby€deed,€pursuant€to€the€terms€of€this€Agreement.Ìò ò€Ìó óà à€à à(Emphasis€added).ÌÌÓÓà àà àThe€Kings€assert€that€the€bank€failed€to€meet€theÏstandard€of€ð ðgood€faith€and€diligenceð ð€required€under€the€termsÍof€the€contract.€€They€argue€that€the€properties€sold€at€lessÏthan€their€appraisal€value,€that€the€bank€did€not€list€theÏproperties€with€a€real€estate€agent€or€broker,€and€that€littleÏadvertising€was€done.Ìà àà àThe€Bank€described€its€marketing€strategy€as€œfollows:€›Ï(1)€obtaining€appraisals,€(2)€notifying€the€business€communityÏof€the€availability€of€the€properties€through€its€ððnetwork€ofÏcontacts,ðð€œand€(3)›€for€the€residence€only,€advertising€in€theÏlocal€newspaper.€€The€procedures€followed€by€the€Bank€do€notÏdemonstrate€bad€faith€or€lack€of€persistence.€€It€is€open€toÏspeculation€whether€more€advertising€or€an€exclusive€listingÏwith€a€realtor€instead€of€agreeing€œto€pay›€the€commission€of€anyÏrealtor€who€œproduced›€a€buyer,€would€have€resulted€in€a€greaterÏsales€price.€€œIt€is€significant€that€this€was€a€failedÏdevelopment€and,€given›€the€bankððs€contact€with€investors€in€theÏcommunity,€the€improvements€necessary€on€some€of€the€properties,Ïthe€Kingsðð€apparent€difficulty€in€selling€the€properties€underÏthe€plan€formed€when€their€loan€was€declared€in€default,€and€theÏbank€having€to€provide€an€interest€free€loan€to€persuade€aÏpurchaser€to€buy€LaVista,€œestablish€that€the›€steps€taken€by€theÏBank€were€œreasonable.€€We€affirm›€the€Chancellorððs€finding€thatÏthe€Kings€did€not€carry€the€burden€of€showing€the€Bank€failed€toÍuse€ð ðgood€faith€and€diligenceð ð.€Ìà àà àThe€question€of€when€interest€would€stop€accruing€isÏnot€directly€addressed€in€the€contract.€€However,€parts€of€theÏcontract€refer€to€the€general€process€by€which€the€debt€would€beÏreduced:€€ÌÓÓà0 àà0 à3.€€That€in€exchange€for€the€conveyance€from€saidÏBorrowers€unto€the€Lender,€Greene€County€Bank,€LenderÏshall€release€their€respective€liens€on€the€Deeds€ofÏTrust,€hereinabove€referred€to,€however,€saidÏòòconveyance€by€Deed€from€the€Borrowers€unto€the€Lender,ÏGreene€County€Bank,€shall€not€be€deemed€and€is€not€aÏsatisfaction€of€the€indebtednessóó€owing€to€the€lenderÏunder€the€Promissory€Notes,€hereinabove€referred€to€.Ï.€.Ìà0 àà0 à4.€€After€execution,€acknowledgment€and€delivery€ofÏsaid€deed€from€the€Borrowers€to€the€Lender,€GreeneÏCounty€Bank,€the€Lender€shall€then€market€saidÏproperties€for€sale€and€òòshall€apply€the€net€proceedsÏof€said€sale€or€sales,€after€payment€of€all€saleÏexpenses€.€.€.€with€the€remaining€balance€to€beÏapplied€to€the€indebtednessóó€owing€by€the€BorrowersÏunto€the€Lender€.€.€.€.Ì€Ìà àà à(Emphasis€added).€€€ÌÌÓÓà àà àThe€contract€states€that€the€conveyance€of€theÏproperties€to€the€bank€does€not€satisfy€the€indebtedness.€TheÏdebt€is€to€be€reduced€by€the€net€proceeds€after€the€bank€hasÏsold€the€property.€€Under€these€terms,€it€is€clear€that€the€loanÏcontinued€in€force€until€the€properties€were€sold.€€TheÏChancellor€properly€held€that€interest€would€accumulate€untilÏthe€properties€were€sold.ò òÌó óà àà àThe€Chancellor€denied€attorneys€fees€to€the€BankÏbecause€ð ðthis€contract€guaranteed€litigation,€and€in€that€regardÏthe€bank€has€as€much€culpability€as€do€defendants.ð ð€€The€BankÏargues€that€the€Chancellor€did€not€have€the€discretion€to€ignoreÏthe€language€of€the€promissory€notes€providing€for€ð ða€reasonableÏattorneyððs€feeð ð€if€the€note€was€placed€in€the€ð ðhands€of€anÏattorney„at„law€for€collectionð ð.€€The€Kings€argue€that€theÏœlatter€contract›€was€a€novation,€extinguishing€the€Bankððs€rightsÏto€attorney€fees.Ìà àà àWhile€a€novation€extinguishes€an€existing€contract€andÏsubstitutes€a€new€oneòò,€Pacific€Eastern€Corp.€v.€Gulf€Life€Co.óó,Ï902€S.W.2d€946€(Tenn.€App.€1995),€the€burden€of€proof€is€on€theÏparty€asserting€the€novation€and€the€parties€must€have€intendedÏto€extinguish€the€previous€obligations.òò€€In€re€OððBrianóó,€154€B.R.Ï480€(W.D.Tenn.€1993).€€Here,€the€terms€of€the€contract€do€notÏestablish€such€intent:€€ÌÓÓà0 àà0 à6.€€This€Agreement€shall€not€prevent€the€Lender€fromÏpursuing€any€legal€action€or€actions€against€theÏBorrowers€(and€each€of€them)€for€collection€of€anyÏdeficiency€judgment€in€regard€to€the€indebtedness€asÏevidenced€by€the€Notes€and€Deeds€of€Trust,€andÏGuaranties€hereinabove€referred€to.ÌÌÓÓà àThis€section€of€the€contract€reserves€the€right€of€the€BankÏto€sue€on€the€promissory€notes.€€The€contract€does€notÏextinguish€the€previous€contract,€òòsee€OððBrian.€€óóThe€terms€of€theÍpromissory€note,€providing€for€the€recovery€of€reasonableÏattorneyððs€fees,€remained€in€force.€€Ìà àà àA€court€of€equity€cannot€make€or€alter€a€contractÏbetween€the€parties,€however,€all€contracts€in€equity€areÏenforceable€in€accordance€with€equity€and€good€conscience.€ÏHere,€the€parties€entered€into€a€subsequent€contract€whichÏbecame€the€focal€point€of€this€action,€but€the€œfact›€œremains›€thatÏdefendants€contracted€to€pay€reasonable€attorneyððs€fees€for€theÏcollection€of€the€indebtedness.€€œòòSee€Young€v.€Jonesóó,€255€S.W.2dÏ703€(CA€1952).€€However,›€the€Bank€would€not€be€entitled€toÏcollect€attorneyððs€fees€for€the€full€scope€of€this€litigation.€ÏUpon€remand,€the€Trial€Court€is€directed€to€establish€aÏreasonable€œattorneyððs€fee›€for€the€collection€of€theÏœindebtedness.€€Not€to€be€taken€into›€account€œare€time,›€expenseÏand€effort€expended€in€the€litigation€over€whether€theÏsubsequent€contract€was€breached.Ìà àà àThe€cost€of€the€appeal€is€assessed€to€Appellants,€andÏthe€cause€remanded.ÌÌÓÓÌÌÌÌà àà àà àà àà àà à________________________Ìà àà àà àà àà àà àHerschel€P.€Franks,€J.ÌÌÌCONCUR:ÌÌÌÌÌÌ___________________________ÌHouston€M.€Goddard,€P.J.ÌÌÌÌÌÌ___________________________ÌDon€T.€McMurray,€J.ÌÌ