author: COOPER, Chief Justice.

text:
    AETNA CASUALTY & SURETY CO., Petitioner, v. J. Marshall SUMMAR, Jr., Respondent.
    Supreme Court of Tennessee.
    Jan. 17, 1977.

      D. L. Lansden, Waller, Lansden, Dortch & Davis, Nashville, for Pinson & Phillips Ins. Agency.
    W. A. Moody, Nashville, for Aetna Cas. & Sur. Co.
    J. Murray Milliken, Joel M. Leeman, Gul-lett, Steele, Sanford, Robinson & Merritt, Nashville, for respondent.
   OPINION

COOPER, Chief Justice.

We granted certiorari in this case to review the holding of the Court of Appeals that Aetna Casualty and Surety Company was primarily liable for payment of the full damage caused by fire to two apartment buildings owned by respondent, J. Marshall Summar, Jr., and that Pinson and Phillips Insurance Agency, Inc., who placed the fire insurance coverage, was secondarily liable for payment of the fire loss.

In 1971 Mr. Summar purchased a multi-peril insurance policy from the General Insurance Corporation of America (SAFECO), covering the Sterling Court Apartments in the amount of $235,000.00 for Building A and $265,000.00 on Building B for a term of three years. The policy, which was purchased through the Pinson and Phillips Insurance Agency, contained an eighty (80%) percent co-insurance clause, which provided that:

“The Company shall not be liable for a greater proportion of any loss to the property covered hereunder than the limit of liability under this co-insurance percentage applicable (specified in this policy) by the actual cash value of such property at the time of the loss.”

During the time this policy was in force, SAFECO paid the full amount of a fire loss claim filed by Mr. Summar. The amount of the claim is not shown in the record, but the evidence does indicate that the claim would be classified as “small.”

In 1973, Pinson and Phillips terminated its relationship with SAFECO. On its own initiative, Pinson and Phillips transferred the insurance coverage on the Sterling Court Apartments from SAFECO to Aetna Casualty and Surety Company, under a binder effective April 1, 1973.

There is evidence in the record that on April 3, 1973, a representative of Aetna informed Pinson and Phillips by telephone that the coverage on the buildings was substantially less than their replacement cost. Mr. Pinson indicated then that he would discuss the coverage with his insured after the Aetna policy was issued.

That night, or in the early morning hours of April 4, 1973, Building A was damaged by fire of incendiary origin. The amount of the damage was $6,731.28. Building B was damaged by fire on April 12, 1973, with that loss being fixed at $9,592.34. Following the fire, at the request of Aetna, Mr. Summar employed a guard to protect the premises against vandalism and further fires. The cost of this service was $897.00.

At the time of the fires, the actual cash value of Building A was $465,963.00 and Building B $446,396.00.

Aetna, in paying the fire losses, applied the co-insurance clause and computed its liability for damage to Building A to be $4,243.00, plus $101.00 lost rent, and for the damage to Building B to be $7,118.84, plus $48.85 lost rent. These amounts were paid to the plaintiff, with the parties agreeing that acceptance of the payment would not prejudice plaintiff in his efforts to recover the full amount of his fire loss. Aetna refused to pay for the guard service.

Mr. Summar filed suit in the Chancery Court of Davidson County seeking to compel Aetna, or, in the alternative, General Insurance Corporation of America (SAFE-CO), to pay the full damage caused by the two fires. As a further alternative remedy, Mr. Summar asked for a judgment against Pinson and Phillips Insurance Agency, Inc., for the difference, if any, between the amount ordered to be paid by the insurance companies and the actual loss sustained by plaintiff.

The chancellor concluded that Aetna’s policy was in force and covered plaintiff’s fire losses. The chancellor also concluded that Aetna had properly computed its liability to plaintiff under the co-insurance clause and had paid plaintiff the full amount due for the fire losses. The chancellor further concluded that plaintiff was entitled to recover the cost of the guard employed at the request of Aetna to protect the apartment buildings against vandalism and fire, and entered judgment in favor of the plaintiff for $897.00. The actions against SAFECO and Pinson and Phillips Insurance Agency, Inc., were dismissed.

The Court of Appeals, with one judge dissenting, reversed the decree of the chancellor and entered judgment for the amount of the fire loss “jointly against Aetna and Pinson and Phillips Insurance Agency, Inc., with interest from date of judgment below, but Aetna will be primarily liable for payment of the judgment.” Plaintiff also was awarded a judgment against Aetna for the cost of the guard service. The judgment dismissing the action against SAFECO was affirmed.

In holding petitioners liable for payment of the entire fire loss, the majority of the Court of Appeals reasoned that:

“Plaintiff had had at least two losses which had been paid by Safeco within the two-year period covered by the Safeco policy, not on an 80% basis, but on a 100% basis. The relationship between the Plaintiff and Safeco was excellent. Safe-co was satisfied with the valuation of the apartments. There is nothing in the record to indicate that Safeco would not have paid the two losses in question on 80% co-insurance on the values set out in Safeco’s policy.
“On the other hand, when Pinson and Phillips decided to cease doing business with Safeco and turn all of its business to Aetna, Aetna indicated to Pinson and Phillips that it would not be satisfied with the valuations on the two buildings with which Safeco was satisfied. Aetna gave notice to Pinson and Phillips that the amount of coverage should be increased on the two buildings. When Pin-son and Phillips received this information from Aetna on April 3, 1973, Pinson and Phillips did not reject the increased coverage but Mr. Pinson told Aetna he would discuss the increased valuation of the buildings and the increased premium with Plaintiff Summar after the policy issued. “Since neither Aetna nor Pinson and Phillips discussed the oral binder with Plaintiff, we find that Pinson and Phillips was, in fact, acting as agent for both Aetna and the Plaintiff.
“An insurance agent is under a duty to keep his principal fully informed of all material knowledge relative to the risk entrusted to him. Couch on Insurance, Section 25:41, Second Edition, 1968. He is liable for failure to obtain the coverage needed by the insured. Routh v. Sanders, (M.S.1946), 29 Tenn.App. 602, 199 S.W.2d 461.
“We will not impute bad faith either to Aetna or Pinsion and Phillips Insurance Agency, Inc. by inferring that they intended to write for Plaintiff a policy that would give him far less protection than he had with Safeco. Plaintiff expected to be 80% co-insured. We hold that Aet-na accepted 80% co-insurance coverage by oral binder subject only to future determination of the actual value of the apartments and the adjustment of the premium." (Emphasis supplied.)

In our opinion, the evidence does not support the holding of the Court of Appeals. To the contrary, as pointed out in the dissenting opinion in that court, the obvious intent in transferring plaintiff’s insurance coverage from SAFECO to Aetna, “was to obtain the identical coverage from Aetna that had been afforded by SAFECO without any premium increase. This is exactly what Aetna has agreed to do and has done. [We] see no reason for the plaintiff to be given a totally unexpected, unpaid for, unbargained for and undeserved windfall.”

Citing the fact that SAFECO had paid a prior loss without resort to the 80% co-insurance clause, plaintiff argues that SAFE-CO would have paid the two April, 1973 fire losses in full and that, consequently, Aetna should be required to pay the losses in full. What SAFECO would or would not have done with respect to payment of the fire losses is speculative and is not made less so by the fact that SAFECO paid a small claim without resort to the 80% co-insurance clause. The SAFECO contract provided for payment of the losses in the same manner and in the same amount provided in the Aetna contract. Aetna made payment in accord with the contract, which is all that it was required to do.

Despite the fact that in changing companies, Pinson and Phillips secured insurance coverage for Mr. Summar’s apartment buildings identical to that purchased by Mr. Summar from SAFECO, the majority of the Court of Appeals concluded that Pinson and Phillips breached a duty in not informing Mr. Summar of the increase in value of the apartment buildings and in not getting additional coverage for the property on being informed by Aetna as to the value of the buildings. We disagree with this conclusion under the facts of this case. This was not a situation where the insurance agent was employed to see that property is insured as was the case in Routh v. Sanders, 29 Tenn.App. 602, 199 S.W.2d 461 (1946). So far as the record shows, Pinson and Phillips did not have authority to secure other and additional coverage and to bind Mr. Summar to pay an additional premium. The original policy of insurance was purchased in 1971. Mr. Summar, who is experienced in the real estate field, knew the value of his apartments when he purchased the coverage. He knew that the apartments had increased in value since the insurance was purchased because of inflation, if not for other reasons. He knew the limits of his insurance coverage and was not in any way depending on Pinson and Phillips to keep the apartment buildings adequately insured. It is argued that having actual knowledge that the valuation of the apartments in the policy was not 80% of the actual cash value of the buildings, Pinson and Phillips was under obligation to so inform Mr. Summar. Under the circumstances, we do not think Pinson and Phillips was under such an obligation. And even if it were, we see no breach of duty in failing to notify Mr. Summar of the call from Aetna relative to valuation of the property before the property was damaged by fire. The call was not received until April 3rd, 1973, and the fire was that evening.

In its petition for certiorari, Aetna also questions the judgment awarding Mr. Summár $897.00 expended in hiring a security guard. As heretofore noted, this expense was incurred by Mr. Summar at the specific request of Aetna to protect the insured buildings against vandalism and fires. We agree with the chancellor and the Court of Appeals that the expense thus incurred is the responsibility of Aetna.

The judgment of the Court of Appeals is reversed and the decree of the Chancery Court is reinstated. Costs incident to the appeal are adjudged against Mr. Summar and his surety.

FONES, BROCK and HARBISON, JJ., concur.

HENRY, J., not participating.


source: Caselaw Access Project

license: Public Domain

text:
    PLEASANT VIEW UTILITY DISTRICT, Petitioner, v. Joel VRADENBURG and wife, Donna Vradenburg, Respondents.
    Supreme Court of Tennessee.
    Jan. 17, 1977.

      Cecil D. Branstetter, Carrol D. Kilgore, Nashville, for petitioner.
    Joe P. Binkley, Nashville, James W. Stin-nett, Jr., Ashland City, for respondents.
   OPINION

COOPER, Chief Justice.

Respondents, Joel Vradenburg and wife, Donna Vradenburg, filed an action in the Chancery Court of Cheatham County in an effort to have that court enjoin the petitioner, Pleasant View Utility District, from discharging waste water onto respondents’ land. The respondents charged that the water does not drain properly, creating a swampy area which is a breeding ground for mosquitos and bacteria, and that the waste water pollutes the fish pond which respondents constructed on their land.

In the course of pleading, petitioner moved to dismiss the action, primarily on the ground that the action complained of amounted to a taking of property by petitioner under its right of eminent domain and that respondents’ exclusive remedy was in the circuit court under T.C.A. § 23-1423. The petitioner also pleaded that respondents’ action for damages “for the taking” of an interest in the property was barred by the one year limitation placed on inverse condemnation actions.

The chancellor, noting the marked similarity between the factual situation set forth in Murphy v. Raleigh Utility District, 213 Tenn. 228, 373 S.W.2d 455 (1963) and the factual situation plead and shown in the affidavits filed in this action, sustained petitioner’s motion and entered a decree dismissing the action.

The Court of Appeals reversed the chancellor’s decree and remanded the case for trial and for a determination of whether respondents were entitled either to injunc-tive relief or to damages. In doing so, the court concluded “that the petition herein is not a suit for damages in reverse condemnation [but] is primarily an injunction suit praying for injunctive and general relief.” The court then reasoned that chancery court having taken jurisdiction for injunc-tive process, had jurisdiction to decide all issues.

The efficacy of the maxim of equity voiced by the Court of Appeals is unquestioned, but is not pertinent under our view of the case. Basically, we disagree with the Court of Appeals as to the nature of the suit. Though couched in terms of a nuisance, respondents seek to enjoin an act by petitioner which, in our opinion, is an act of “taking” an interest in real property.

Setting the factual background for the suit, it is undisputed that petitioner is a utility district vested with eminent domain powers. See T.C.A. §§ 6-2601 through 6-2636. In 1964 petitioner constructed a water purification and chlorination facility and a water storage tank on land it had purchased for that purpose. According to affidavits filed in support of the motion to dismiss, which were considered by the trial court by consent of the parties, the operation of the water purification facility required that petitioner flush the filtration system at least once every three days. From the outset, the thousands of gallons of water used to flush the system were discharged across land adjoining the water filtration plant.

In 1974, the respondents purchased the land over which petitioner was discharging its waste water, built a lake on the property, and then brought the present action to enjoin the utility district from discharging water across respondents’ land and into the newly created lake.

Having the power of eminent domain, any action of petitioner, in carrying out the purposes for which it was created, which destroys, interrupts, or interferes with the common and necessary use of real property of another is a “taking” of such property, and the landowner’s remedy is an action for damages under the inverse condemnation statute (T.C.A. § 23-1423), not injunctive relief; and, the action for damages is subject to the one year time limitation set forth in T.C.A. § 23-1424. See Monday v. Knox County, 220 Tenn. 313, 417 S.W.2d 536 (1967); Jones v. Hamilton County, 56 Tenn.App. 240, 405 S.W.2d 775 (1966), Murphy v. Raleigh Utility District, supra. The case of East Tennessee and W.N.C.R. Co. v. Gouge, 30 Tenn.App. 40, 203 S.W.2d 170 (1947) is not to the contrary for in that case the railroad did not plead the limitation set forth in T.C.A. § 23 — 1424.

T.C.A. §§ 23-1423 and 23-1424 apply even in the cases where there is no actual entry upon the land. Jones v. Hamilton County, supra; Morgan County v. Neff, 36 Tenn.App. 407, 256 S.W.2d 61 (1952); Hollers v. Campbell County, 192 Tenn. 442, 241 S.W.2d 523 (1951). And, as is pointed out in Morgan County v. Neff, supra, “where the land is taken either without a conveyance or a condemnation proceeding there is no hardship in holding that the period (of limitation) begins, as the statute expressly provides, when the land is taken possession of.”

There is no question in this case but that throughout the ten year period immediately preceding the filing of this suit, the petitioner intentionally, regularly, and necessarily discharged a large volume of water onto and across the land now owned by respondents. This action of the petitioner was a “taking of a flowage easement” across the land — a taking for which petitioner was liable in damages, provided an action was filed in the circuit court by the then landowner within twelve months of the “taking.” But, here, no action was taken by the landowner for more than ten years; and, when taken, the action was filed in chancery not circuit court as required by the inverse condemnation statute. The action being filed in the wrong court and also being barred by the time limitation set forth in T.C.A. § 23-1424, we hold that the chancellor correctly dismissed the action on proper plea.

The judgment of the court of Appeals is reversed. The decree of the chancellor is affirmed. Costs incident to the appeal are adjudged against respondents’ and their surety.

FONES, BROCK and HARBISON, JJ., concur.

HENRY, J., not participating.

      . The motion to dismiss, being supported by affidavits presenting matters outside the pleadings, must be treated as a motion for summary judgment. See Tennessee Rules of Civil Procedure 12.03.


text:
    R. E. WORRALL, County Court Clerk for Davidson County, Tennessee, et al., Appellants, v. The KROGER CO., an Ohio Corporation, Appellee.
    Supreme Court of Tennessee.
    Jan. 17, 1977.

      Robert W. Rutherford, Dept, of Law of Metropolitan Government, William J. Haynes, Jr., Asst. Atty. Gen., Brooks McLe-more, Jr., Atty. Gen., Nashville, for appellants.
    W. W. Berry, James C. Gooch, Nashville, for appellee.
   OPINION

COOPER, Chief Justice.

This appeal is from a decree of the Chancery Court of Davidson County that the Kroger Company can offset all personal property taxes paid the Metropolitan Government of Nashville and Davidson County against the gross receipts tax owed by Kroger to Metro under the Business Tax Act.

The Kroger Company filed this action against R. E. Worrall, the County Court Clerk of Davidson County, seeking a refund of gross receipts taxes assessed under the "Business Tax Act” and paid under protest.

The taxpayer, the Kroger Company, is engaged in the business of operating retail grocery stores. During the tax year involved, Kroger operated thirteen such stores in Davidson County. In addition, Kroger operated a distribution center located on Elm Hill Pike in Nashville, Tennessee. The function of the distribution center was to provide a central office and warehouse for Kroger’s retail outlets. Kroger’s business records were maintained at the distribution center, and merchandise was collected there and then distributed to the various retail outlets. No sales were made from the distribution center, other than dispositions of damaged merchandise and waste materials. Merchandise was transferred at cost from the distribution center to the Farmer’s Market Warehouse Store, a wholly owned subsidiary of the Kroger Company.

For the tax year ending November 30, 1974, Kroger filed a consolidated business tax return, covering its places of business in Davidson County, and tendered payment of $240.50, which was the amount of the minimum tax due for the retail outlets after taking credit for personal property taxes paid Metro.

Mr. Worrall refused to accept the payment, advising Kroger’s that it could not take credit for personal property taxes attributable to its distribution center, and demanded payment of $19,918.40. Kroger’s paid this sum under protest, and then filed suit for the recovery of $19,677.90, being the amount of taxes paid under protest less the minimum tax of $240.50 conceded by Kroger’s to be due.

The Commissioner of Revenue for the State of Tennessee was permitted to intervene as a defendant, since a part of the gross receipts tax paid by Kroger’s ultimately would be paid to the state.

On trial of the cause, the chancellor concluded, among other things, that:

“2. The Business Tax Act allows credit on business tax for all personal property tax paid under T.C.A. § 67-601, et seq., to the government to which it owes business tax. T.C.A. § 67-5814(c).

“3. The statute contains no limit or qualification to each location or outlet as claimed by defendant. The only limit is that a taxpayer, in computing its business tax to a governmental entity, can only take credit for personal property tax paid to that governmental entity. T.C.A. § 67-5814(d).

“4. The plaintiff’s Distribution Center is not a separate place of business from the retail outlets, therefore, even if defendant’s construction of the statute was correct, plaintiff would still be entitled to credit for all the personal property taxes paid to defendant.”

The chancellor then entered a decree holding that Kroger’s was entitled to recover the business tax paid under protest, plus interest from the date of payment.

Appellants insist that the chancellor erred in interpreting the provisions of the Business Tax Act so as to allow plaintiff to interchange tax credits among its various business locations in computing its business tax liability. Appellants also assign as error the finding by the chancellor that Kroger’s distribution center was not a separate place of business.

The Business Tax Act, enacted in 1971, is set forth in T.C.A. §§ 67-5801 — 67-5829. By it, the legislature undertook to create a system of state and local taxation upon the privilege of engaging in certain types of business activities, replacing certain parts of the privilege tax law of the state and providing for a classification of businesses for the state and local administration of the system of taxation established in the Act. The legislature expressly stated that it intended the taxes imposed by the Act to be “in lieu of any or all ad valorem taxes on the inventories of merchandise held for sale or exchange by persons taxable” under the Act. T.C.A. § 67-5801.

Section 67-5805 sets forth various classifications of businesses, and Kroger comes within classification 1, which includes persons engaged in the business of selling food.

Section 67 — 5806 requires each taxpayer to pay a minimum tax of $15.00 for “each place, location or outlet from which business is carried on”. In addition to the minimum tax, each taxpayer is required to pay a tax on its gross receipts according to the taxpayer’s dominant business activity. The percentage rate of taxation for businesses in Kroger’s classification is ¼5 of 1% of retail sales.

Section 67-5807 provides for the filing of tax returns for each location or outlet and the date of payment of the taxes. By an amendment passed in 1973, a taxpayer operating more than one place of business is permitted to file “a consolidated tax return for all business locations in a single taxing jurisdiction.”

Section 67-5814 sets forth credits allowed a taxpayer in computing its business tax liability. The relevant portions of the section provide as follows:

“67-5814. Credits Allowable. — The following credits may be taken by persons filing and paying tax imposed by this chapter:
(a) • ■ •
(b) The minimum tax actually paid;
(c) . . . for each year subsequent to 1971, personal property taxes paid as a result of assessments made under the provisions of § 67-601 et seq.
(d) Provided, however, that the sum of the credits allowable under subsections (b) and (c) of this section may not exceed the amount owed from applying the prescribed tax rate against the measure of the tax. Provided, further, however, that the credit authorized in subsection (c) of this section is allowable only on returns filed with, and taxes paid to, each respective governmental entity to which personal property taxes are paid as a result of assessments made under the provisions of § 67-601 et seq.”

The fundamental rule of statutory construction is to ascertain and, if possible, give effect to the intention or purpose of the legislature as expressed in the statute. State ex rel. Rector v. Wilkes, 222 Tenn. 384, 436 S.W.2d 425 (1968). This legislative intent or purpose is to be ascertained primarily from the natural and ordinary meaning of the language used, when read in the context of the entire statute, without any forced or subtle construction to limit or extend the import of the language. Rector v. Wilkes, supra; Moto-Pep v. McGoldrick, 202 Tenn. 119, 303 S.W.2d 326 (1957); Rose v. Blewett, 202 Tenn. 153, 303 S.W.2d 709 (1957).

Appellants argue that the several references in the Act to a minimum tax for each outlet or location or place of business “evince a scheme of taxation applicable to the remaining taxes due under the Act.” and that the scheme is that the taxpayer is to compute his gross receipts tax liability on each separate retail outlet, taking as a credit only the personal property taxes attributable to that outlet.

In our opinion the minimum tax provision of the Act is not a controlling fact in determining whether, in the computation of the gross receipts tax, the appellee has the right to a credit for any and all personal property taxes paid to the taxing authority. As is pointed out by appellee in its brief, “the imposition of a minimum tax for each retail outlet is similar to the old requirement that a merchant pay a minimum license fee for the privilege of operating at each separate location, regardless of the volume of business at such location. Such license fees are a familiar way of taxing business activity, and it is not surprising that the drafters of the Business Tax Act chose to impose a minimum fee for the privilege of operating each separate retail outlet.”

But, further and more important, the construction placed on the Business Tax Act by appellants ignores the salient fact that the legislature declared its intent that the taxes imposed by the Act be “in lieu on any and all ad valorem taxes on the inventories of merchandise held for sale or exchange by persons taxable” under the Act. To accomplish its intent, the legislature expressly provided that in computing its business tax liability, the taxpayer could take credit for all personal property taxes paid the taxing authority to which it owes business tax, subject to the limitation that the credit taken can not exceed the business tax owed. If the legislature had intended to further limit the credit for personal property taxes as contended by the defendants, it could easily have said so, but it did not.

Absent such a limitation, we are constrained to agree with the chancellor’s construction of the Business Tax Act and hold, as he did, that the Act allows credit on the business tax for all personal property tax paid under T.C.A. § 67-601 et seq. to the government to which the business tax is owed.

Appellants have also assigned as error the finding by the chancellor that Kroger’s distribution center was not a separate place of business.

This finding obviously was to support the chancellor’s holding that Kroger’s is entitled to a refund of the business tax paid under protest, in the event this court placed a construction on the Act different from the one voiced by the chancellor. Since we have concluded the construction placed on the Act by the chancellor is correct, this assignment is not controlling and is preter-mitted.

The decree of the chancellor is affirmed. Costs incident to the appeal are adjudged against the appellants.

FONES, BROCK and HARBISON, JJ., concur.

HENRY, J., not participating.


author: BROCK, Justice.

text:
    Estelle W. DELFFS, Petitioner, v. James Coy DELFFS, Respondent.
    Supreme Court of Tennessee.
    Jan. 17, 1977.

      Jeffrey S. Henry, Murfreesboro, for petitioner.
    Allen Shoffner, Shelbyville, for respondent.
   OPINION

BROCK, Justice.

This controversy over the right to administer an intestate’s estate originated in the county court of Bedford County which issued letters of administration to James Coy Delffs, the eldest son of the decedent, Coy A. Delffs. This appointment was challenged by Mrs. Estelle Delffs, who petitioned the county court to revoke the letters, asserting that she, because she was the decedent’s widow, had the superior right under T.C.A. § 30-109 to administer the estate. The county court denied her petition and she appealed from the order of denial to the circuit court.

James Coy Delffs moved in the circuit court that the appeal be dismissed because (1) the record did not show that an appeal was prayed or granted in the county court, (2) the transcript was not filed within the time prescribed by T.C.A. § 27-404, and (3) that no bill of exceptions of the county court hearing was preserved and filed in the circuit court.

The circuit judge overruled the motion to dismiss the appeal and heard the case upon the transcript of the “technical record” without the introduction of evidence. His conclusion was that the letters of administration had been issued without notice to the widow and, accordingly, remanded the case to the county court with directions that it conduct an evidentiary hearing, upon notice to all parties, and that the widow, Estelle Delffs, be appointed administratrix unless it be shown at such hearing that she is unfit to serve in that capacity.

James Delffs appealed from the judgment of the circuit court to the Court of Appeals, relying upon his threefold argument that the appeal to the circuit court was improper and should not have been allowed. The Court of Appeals pretermit-ted the issue whether or not an appeal had been properly prayed and granted from the county court to the circuit court, held that the record failed to substantiate the claim that the transcript had been filed too late, but concluded that a bill of exceptions was essential to a review, and since the widow had not preserved a bill of exceptions of the proceedings in the county court and filed the same in the circuit court, held that the circuit court was without authority to entertain the instant appeal and ordered that the widow’s petition be dismissed.

The widow, Mrs. Estelle Delffs, petitioned this Court for review by certiorari which was granted; and, the respondent, James Coy Delffs, filed cross assignments of error to review the action of the Court of Appeals upon the issues whether or not an appeal was properly prayed and granted to the circuit court and whether or not the transcript of the record was timely filed in that court.

I.

The conclusion reached by the Court of Appeals that a bill of exceptions was essential was based upon Griffits v. Rockford Utility District, 41 Tenn.App. 653, 298 S.W.2d 33 (1956). The opinion in that case contains a rather broad dictum that T.C.A. § 27 — 408 mandates that appeals in all cases from the county court to the circuit court, except jury cases and chancery cases, or proceedings in the nature of chancery cases, shall be reviewed as appeals in the nature of writs of error are reviewed rather than as appeals, which afford de novo hearings in the circuit court.

We cannot accept this dictum as authority for determination of the question before us. The actual holding in the Grif-fits case was that T.C.A. § 6 — 2606 provides for an appeal in the nature of a writ of error, rather than an appeal, to the circuit court from an order of the county court establishing a utility district. In such a proceeding, the county judge acts not as a court but as an administrative agency, Whitehouse Gas Utility District v. Cross Plains Natural Gas Utility District, Tenn. App., 60 Tenn.App. 162, 445 S.W.2d 459 (1969). The Court of Appeals in the Grif-fits case concluded that the issues in such a proceeding are not appropriate for review by appeal in the circuit court and, thus, that the legislature must have intended by T.C.A. § 6-2606 to provide for an appeal in the nature of a writ of error, rather than an appeal.

The denial by this Court of certiorari in the Griffits case must not be considered as approval of the dictum mentioned but only as approval of the narrow holding in that case. In our opinion, T.C.A. § 27-408 should not be construed to mean any more than is expressly stated therein, that is, that “on appeal, all jury cases in the county court shall be tried de novo in the circuit court and all chancery cases, or proceedings in the nature of chancery cases, shall be reheard as if the proceedings had been commenced in the circuit court.” From the beginning of this State, the appellate remedy known as an appeal has been understood to provide a de novo hearing in the appellate court. The provisions of T.C.A. § 27-408 have been on the statute books throughout that period. There is no justification at this late date for ascribing to that code section the extraordinary and restrictive meaning suggested in the Griffits opinion.

Orders of the county court appointing executors and administrators may be reviewed by an appeal as provided by T.C.A. § 30-110 and 30-111:

“30-110. Appeal from grant of letters to circuit court. — If any person who claims a right to execute a will, or to administer on the estate of an intestate, think himself injured by an order of the court awarding letters testamentary or of administration, he may appeal to the circuit court of the county in which the order is made, on giving bond as in other cases of appeal.
“30-111. Determination of appeal— Time. — At the circuit court next succeeding such appeal, the same shall be determined, and the judgment shall be certified to the county court, that it may proceed in the case accordingly.”

In Fitzgerald v. Smith, 112 Tenn. 176, 78 S.W. 1050 (1903), this Court considered a case strikingly similar to the one at bar and held that upon an appeal from an order of the county court appointing an administrator the circuit judge should have conducted a hearing de novo, including the introduction of evidence, respecting the qualifications of the contestants to serve as administrator of the estate.

“The cause was for hearing before the trial judge upon its merits and de novo, so that, no matter what may have been the opinion and finding of the county judge, the circuit judge should have heard the facts, and should have for himself determined whether the petitioner was disqualified from holding the office and executing the trust or not.
“The proof that had been taken in the county court was not a part of the record in the circuit court, and could not be looked to to determine the disqualification of the petitioner. The record, as presented to the circuit judge, showed the petitioner to be the next of kin, and therefore entitled to administer, unless his unfitness should be made to appear. The judgment of the county court, being appealed from, was set aside, and of no probative or presumptive effect.” 78 S.W. at 1052.

In In Re Wooten’s Estate, 114 Tenn. 289, 85 S.W. 1105 (1904), this Court again recognized that the hearing in the circuit court upon an appeal from an order of the county court appointing an administrator or executor should be de novo in nature, saying:

“It is true that while the appeal was pending in the circuit court that court had jurisdiction and power to make all amendments, and, if necessary, to introduce new parties to determine the questions involved and contested in the county court, and the proceedings in that court were de novo ; but it had no power to consider the application of any one who was not a party to the contest in the county court.” 85 S.W. at 1108.

We are not aware of any statute or decision of this Court altering this rule. Accordingly, we hold that upon review by an appeal of an order of the county court appointing an administrator or executor, the case is to be heard de novo in the circuit court. It follows that no bill of exceptions of the proceedings in the county court is required to be filed in the circuit court in connection with such an appeal. The decision of the Court of Appeals to the contrary was error.

Furthermore, a bill of exceptions is never required, whatever the appellate remedy employed, if the error of the lower court appears in the technical record. The alleged error found by the circuit court in this case, failure of the county court to give notice of the original hearing to the widow, was such an error.

Assuming, but not deciding, that an appeal from the county court must be shown by a minute entry to have been prayed for and granted, we hold that this requirement was met in this case. “Upon motion of the Petitioner . . .” is a sufficient prayer and “. . . it is hereby ordered that the entire record in the Estate of Coy A. Delffs, deceased, be certified and sent to the Circuit Court of Bed-ford County, Tennessee” is a sufficient grant of an appeal, appeal being the appellate remedy prescribed in such cases. T.C.A. § 30-110.

Failure to file the transcript within the time prescribed by T.C.A. § 27-404 is not necessarily fatal to an appeal from the county court. T.C.A. § 27 — 407 expressly provides that dismissal of an appeal upon this ground is within the discretion of the court. No abuse of discretion is shown; indeed, it is not shown that the filing of the transcript was tardy.

The decree of the Court of Appeals is reversed and this cause is remanded to the circuit court for a de novo hearing in accordance with this opinion. Upon such hearing, the circuit court shall determine the fitness of the contending parties to act as administrator and certify its judgment to the county court as provided by T.C.A. § 30-111. The county court shall then appoint an administrator, giving due regard to the priorities set out in T.C.A. § 30-109.

Costs are taxed against the respondent.

COOPER, C. J., and FONES, HENRY and HARBISON, JJ., concur.

      . The county court is directed to determine “the convenience and necessity of the incorporation of the district to perform the services stated in the petition.” T.C.A. § 6-2604.

      . These provisions first came into our law as § 48 of Chapter I, Acts of 1794, of the territorial legislature.


text:
    Michael P. BRODBINE, d/b/a Tara, etc., Appellants, v. Joe E. TORRENCE, Director of Finance, and the Metropolitan Government of Nashville and Davidson County, Tennessee, Appellees.
    Supreme Court of Tennessee.
    Jan. 17, 1977.

      Thomas A. Wiseman, Jr., James L. Beck-ner, Nashville, for appellants.
    Robert Rutherford, Nashville, for appel-lees.
   OPINION

BROCK, Justice.

The Chancellor dismissed the complaint in this case for failure to state a claim upon which relief could be granted and plaintiff appealed.

Plaintiff, Brodbine, is a restaurant operator in Nashville who is licensed to sell alcoholic beverages for consumption on the premises of his restaurant, “Tara.” He filed this suit as a class action on behalf of himself and 149 others licensed in Nashville for the sale of alcoholic beverages for on-the-premises consumption, alleging that the defendant Metropolitan Government had collected and was continuing to collect unlawful taxes from the plaintiff licensees. The relief sought was recovery of the taxes already paid and those “paid subsequent to the filing of this complaint.”

The defendants’ motion to dismiss for failure to state a claim asserted that the plaintiff had “failed to comply with the provisions of T.C.A. § 67 — 2301, et seq.” The code provisions referred to govern proceedings to recover taxes illegally exacted by the State or municipal corporations and require that, in order to maintain an action for such recovery, the taxpayer must first (1) pay the contested tax, (2) under “protest” and (3) file suit for refund within thirty (30) days after payment.

The Chancellor granted the defendants’ motion and dismissed the complaint.

Upon appeal, the parties have focused primarily upon the question whether or not the filing of the complaint constitutes sufficient “protest” with respect to the taxes paid by plaintiff subsequent to the filing of suit, but defendants have raised a more fundamental issue, i. e., that the plaintiff and others licensed to sell alcoholic beverages for consumption on the premises of their restaurants, etc., have not paid and are not paying the tax in question and, therefore, cannot maintain an action for refunds.

Of course, plaintiff cannot have “refunded” to him taxes he has not paid. And, to be considered the “taxpayer” it is not enough to show that in the course of business the economic burden of the tax was passed on to him by the true taxpayer; he must show that the taxing statute, in terms, imposes the tax upon him and creates obligations owing by him to the taxing authority. See Smoky Mountain Canteen Co. v. Kizer, 193 Tenn. 598, 247 S.W.2d 69 (1952); Diamond National Corp. v. State Board of Equalization, 49 Cal.App.3d 778, 123 Cal.Rptr. 160; 53 C.J.S. Licenses §§ 47, 57, 660-661. The taxing ordinance, Metropolitan Code, § 5-1 — 24—5-1-30, clearly shows upon its face that it levies a tax (called “a regulatory and supervisory fee”), not upon retailers of liquor for on-the-premises consumption such as plaintiff, but upon “each wholesaler” of such alcoholic beverages. Metropolitan Code, § 5-1 — 25. The tax is a fixed percentage “on all sales of alcoholic beverages or wine made by such wholesaler.” Ibid. The ordinance requires all wholesalers to remit each month to the director of finance all fees thus imposed, less a “collection fee” for “collecting and reporting” such fees. Ibid. § 5-1-27. Failure to report and remit such fees on or before the 10th day of each month subjects the wholesaler to a monetary penalty and, in the discretion of the Mayor, to suspension or revocation of such wholesaler’s license. Ibid. § 5-1-29.

We find no provision of this ordinance which purports to levy any tax or “fee” upon plaintiff or other retailers. The ordinance does not require wholesalers to pass the imposed tax or fee on to the retailer, but, even if it did, this would not convert the tax into one imposed upon retailers. Smoky Mountain Canteen Co. v. Kizer, supra. This is not a statute which imposes a tax upon one individual but authorizes and directs another to act as the agent for the taxing authority for the collection of the tax imposed.

Furthermore, the plaintiff alleges in his complaint that the tax:

. . is collected from the plaintiff and other members of the class by the liquor wholesalers on virtually a daily basis. Every day of the week, excluding Sundays, deliveries of liquor are made by the wholesalers to the approximately one hundred forty-nine (149) members of the class. Additionally, each of the wholesalers chooses its own date to remit the monthly levy to the defendants, between the first and the twentieth of the ensuing month.”

Considering the ordinance and the complaint together, we conclude that the plaintiff and others in his class are not the ones upon whom this tax is imposed; on the contrary, we hold that this tax is imposed upon the wholesalers who supply the plaintiff retailers of liquor-by-the-drink with alcoholic beverages. Consequently, any right to recover such taxes belongs to the wholesalers who paid them, not to the plaintiff retailers. Accordingly, we affirm the decree of the Chancellor dismissing the complaint for failure to state a claim upon which relief may be granted. Other questions raised by the plaintiff upon appeal are pretermitted.

Costs will be paid by appellants.

COOPER, C. J., and FONES, HENRY and HARBISON, JJ., concur.


author: SANDERS, Judge.

text:
    Hubert D. WALLER et al. v. Jack E. THOMAS and wife, Blanche Thomas.
    Court of Appeals of Tennessee, Eastern Section.
    July 28, 1976.
    Certiorari Denied by Supreme Court Oct. 4, 1976.

      Jack W. Bowers, with Foley, Bowers & Bell, Knoxville, for appellants.
    Harry W. Asquith, with Asquith, Ailor & Jones, Knoxville, for appellees.
   OPINION

SANDERS, Judge.

Plaintiffs have appealed from a Chancery decree denying their application for an injunction to enjoin the Defendants from violating restrictive covenants of a subdivision.

The Plaintiffs-Appellants, Hubert D. Waller, Lynn Leopper and Kenneth Yar-nell, filed suit in the Chancery Court of Knox County against the Defendants-Ap-pellees, Jack E. Thomas and wife, Blanche Thomas. The suit seeks to enjoin the Defendants from operating a beauty salon in their home, allegedly in violation of certain restrictive covenants imposed on the lots in the subdivision in which both the Plaintiffs and Defendants live.

The restrictive covenants which the Plaintiffs contend the Defendants are violating are as follows:

“1. All lots in the Subdivision shall be known and described as residential lots. No structure shall be erected, altered, placed or permitted to remain on any of said lots other than buildings for residential purposes not to exceed two and one-half (2½) stories in height. Unconnected private garages and/or outbuildings shall be constructed on said lots only behind the front wall of the residence constructed thereon and of material similar to the residence, and no other outbuildings shall be erected on said lots, except for servants quarters.”
“3. No merchantile business or industrial trade or activity shall be carried on upon any lot nor shall anything be done thereon which may be or become an annoyance or nuisance to the neighborhood.”

The case was tried before the Chancellor, who found the issues in favor of the Defendants.

The Plaintiffs have appealed and assigned error. The Plaintiffs’ first two assignments of error contend the Chancellor erred in his interpretation of the restrictive covenants.

The record shows the subdivision in which the Plaintiffs and Defendants live is a high-class residential subdivision. The Defendants purchased their house after it had been constructed. It is a one-story brick dwelling and, as originally constructed, had a orie-car attached garage. After Defendants purchased the house they removed the garage doors and replaced them with sliding, glass doors. They installed plumbing and otherwise remodeled the interior of the garage area and converted it into a beauty salon. The Defendant, Blanche Thomas, is the sole operator of the beauty salon and there are no signs displayed or other exteri- or evidence depicting it as a beauty salon.

The Chancellor held that the operation of the beauty salon did not constitute a violation of the restriction against carrying on a “merchantile” or “industrial” trade and, accordingly, there was no violation of the restricted use.

The Plaintiffs insist this was error and say restriction No. 1 prohibits the use of the property for any purpose other than residential.

Our courts have long recognized several established rules of construction regarding restrictive covenants, which can be stated as follows: Although the law recognizes the validity of restrictive covenants, they are not favored because such covenants are in derogation of the unrestricted enjoyment of the fee. Therefore, restrictive covenants are to be strictly construed and will not be extended by implication and any ambiguity in the restriction will be resolved against the restriction. See Emory v. Sweat, 9 Tenn.App. 167 (1927); Carr v. Trivett, 24 Tenn.App. 308, 143 S.W.2d 900 (1940); Lowe v. Wilson, 194 Tenn. 267, 250 S.W.2d 366 (1952); Hamilton v. Broyles, 57 Tenn.App. 116, 415 S.W.2d 352 (1966).

It is also a rule of construction that the court is required to give a fair and reasonable meaning to restrictive covenants in order to determine the parties’ intention and once the intention of the parties is ascertained, the covenant will be enforced, provided it serves a legitimate purpose and does not constitute a nuisance per se. White v. Gulf Refining Co., 156 Tenn. 474, 2 S.W.2d 414 (1928); Hamilton v. Broyles, supra.

An examination of the cases in Tennessee reveals that our courts have not addressed the issue of whether or not the incidental use of a dwelling house for operating a beauty salon violates a covenant restricting its use to residential purposes; however, there are a number of cases in other jurisdictions which have addressed this particular issue. A review of these cases reveals that the courts have generally recognized, either explicitly or by implication, that an incidental use of a dwelling house for the operation of a beauty salon does not necessarily constitute a violation of a covenant restricting the use of the dwelling to residential purposes; whether such incidental use constitutes a violation depends upon the wording of the particular covenant and the extent and manner in which the incidental use is conducted.

In Monigle v. Darlington, 32 Del.Ch. 137, 81 A.2d 129 (1951), a case factually similar to the case at bar, the court denied injunc-tive relief against the defendant’s operation of a beauty shop in the basement of her residence. The deed contained a provision that the property should be used for residential purposes only and another provision prohibiting the erection and maintenance of any noxious, dangerous, or offensive thing, trade or business whatsoever on the property. As in the case at bar, the exterior of the dwelling remained unaltered except for a small sign with the words “Darlington” printed on it in one of the windows. The rationale used by the court in determining the prohibitory intent of the covenant is noteworthy. The court construed the first restriction in the covenant as applying to the use of the premises in addition to a restriction on the type of structure which might be erected and said that the restriction on use was necessarily limited by the prohibited uses enumerated in the second restriction in the covenant.

In contrast, the Delaware court barred the operation of a beauty salon in a residence in the case of Laux v. Phillips, 37 Del.Ch. 435, 144 A.2d 409 (1958). The court distinguished the result from that reached in Monigle v. Darlington, supra, by pointing out the differences in the wording of the restrictions. In Laux v. Phillips, supra, the first clause of the covenant was the decisive clause providing that: (1) no structure should be used for carrying on any business, trade, or calling and, for this reason, it was unnecessary to determine whether the second clause of the restrictive covenant was violated because the beauty shop fell within the intended prohibition of the first clause. While the result may vary, the reasoning of the court in Monigle v. Darlington, and Laux v. Phillips, supra, is consistent.

The reasoning of the Delaware court is not in conflict with the courts of this state. The court is aware of only one case in Tennessee specifically addressing the issue of the incidental use of a dwelling for business purposes under a restrictive covenant that it be used for residential purposes, Carr v. Trivett, supra. The court in Carr enjoined the incidental use of a dwelling for a tourist home in a restricted location, but the case is distinguishable from the case at bar for two reasons: first, the restrictions on the use of the property contained in the deed were clear and unambiguous, using language as follows: “. . . said property shall not be used except for residential purposes and that no building or structure shall be erected thereon to be used for the purpose of any trade, manufacture or other business”; and, second, the extent of the use of the premises for business purposes went beyond incidental use. Approximately one-half of the dwelling was being used in connection with the business.

Carr v. Trivett, supra, is important however, because the case illustrates that the courts of Tennessee are in agreement with the general proposition that whether an incidental use of residential property for business purposes is in violation of a covenant restricting use to residential purposes depends upon the wording of the restriction and the extent and nature of the use.

If the restrictions in the case at bar merely contained the statement that the lots in the subdivision were to be used for residential purposes as stated in the first restriction in the covenant without further elaboration, the Appellants would be entitled to relief. However, the restrictions, as noted in the Chancellor’s memorandum opinion, contain other specific restrictions. This elaboration, in light of the decision in Monigle v. Darlington, supra, can only be interpreted as a limitation of the broader restrictive language contained in the first restriction.

The holding by the Chancellor that the Defendants were not engaged in a “merchantile business or industrial trade or activity” is supported by the case cited in the Appellees’ brief of State Farm Insurance v. Rowland, (1965), 111 Ga.App. 743, 143 S.E.2d 193, where the court said:

“Now the next question is, was this structure used in whole or in part for mercantile purposes.
“Webster defines ‘mercantile as pertaining to merchants or to the business of merchants.’ (Quoted In Re San Gabriel Sanitorium Company, 9 Cir., 95 F. 276 (271).
“In addition to this, we have these further definitions:
“The word ‘mercantile,’ in its original acception pertains to the business of merchants and has to do with trade or buying and selling of commodities. In Re Cameron Town Mutual Fire, Lightning & Windstorm Ins. Co., 8 Cir., 96 F. 756, 757. People v. Fed. Security Co., [People v. Fed. Security Co., 255 Ill. 561, 99 N.E. 668]. (Cited in Words & Phrases, Vol. 27, page 95.)
“ ‘The term “mercantile business” is defined to mean the buying and selling of articles of merchants as an employment.’ Veazey Drug Co. v. Bruza, 169 Okl. 418, 37 P.2d 294.
“ ‘A merchant’ is one who is engaged in buying and selling goods, wares or merchandise for gain or profit. ‘Mercantile’ pertains to the business of merchants. Cleve v. Mazzoni, Ky., 45 S.W. 88, 89.
“A shoe shine parlor and hat cleaning establishment is not a ‘mercantile establishment’, within the meaning of a lease providing that the premises shall not be used for other than mercantile purposes. Cesar v. Virgin, 207 Ala. 148, 92 So. 406, 407, 24 A.L.R. 715.”

Plaintiffs’ first two assignments are overruled.

The Plaintiffs’ third assignment of error states that the Chancellor erred in finding that the Defendant’s beauty salon did not create conditions in the subdivision which constitute a nuisance or annoyance in accordance with the third restriction in the restrictive covenants. The main thrust of the Plaintiffs’ complaint appears to be that patrons of the Defendant’s establishment would park their cars on the street, thereby creating a hazardous condition near the entrance to the subdivision and that the existence of the beauty salon caused the depreciation of the value of the land in the subdivision.

The proof reflects that the parking problem complained of existed only for a brief period of time prior to the installation of a circular driveway in front of the Defendants’ house for the purpose of accommodating patrons.

With respect to the allegation that the Defendant’s beauty salon caused a depreciation of the value of the land in the subdivision, the proof is inconclusive. The proof reveals that the Defendant maintains no sign on her house or advertising for her business and proof regarding the sale of a similar house in the subdivision did not reveal that the seller realized any reduction in the value of his house or that the buyer was even aware that the beauty parlor was in existence.

The issues raised in Plaintiffs’ third assignment are factual matters which the Chancellor resolved against them.

Our review of nonjury cases such as this is governed by the following principles as set out in Roberts v. Ray, 45 Tenn.App. 280, 322 S.W.2d 435:

“While the hearing of this case here is de novo, it being a non-jury case, the Trial Judge’s conclusion is supported by a presumption of correctness unless the evidence preponderates against it (T.C.A. Sec. 27-303); and the burden is on defendant-appellant to show that the evidence does preponderate against it. Jackson v. Jackson, 25 Tenn.App. 198, 202, 154 S.W.2d 797; Morrell v. Republic Fire Ins. Co. of Pittsburg, 168 Tenn. 137, 140, 76 S.W.2d 317, 318.”

We cannot say the evidence preponderates against the Chancellor’s findings.

Plaintiffs’ assignments of error are overruled. The decree of the Chancellor is affirmed and the cost of this appeal is taxed to the Appellants.

PARROTT, P. J. (E. S.), and GODDARD, J., concur.


author: PARROTT, Presiding Judge (E. S.).

text:
    AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHATTANOOGA, Appellant, v. John H. WILDS et al., Appellees.
    Court of Appeals of Tennessee, Eastern Section.
    Oct. 6, 1976.
    Certiorari Denied by Supreme Court Jan. 17, 1977.

      Paty, Lawrence & Rymer, Chattanooga, for appellant.
    Hall, Haynes, Lusk & Foster, Chattanooga, for Ernest G. Clemons, and others.
   OPINION

PARROTT, Presiding Judge (E. S.).

This is an appeal from a circuit court order enjoining the sale of property purchased by appellees, Ernest G. Clemons and Juanita Clemons, after the appellant, American National Bank and Trust Company of Chattanooga, had attached the property pending the determination of a debt action against the original property owners, John and Laverne Wilds.

The trial judge determined that Mr. and Mrs. Clemons were bona fide purchasers for value and that the Bank failed to record its attachment as required by T.C.A. 25-501 et seq. and related statutes, to defeat the rights of a bona fide purchaser.

The Bank has assigned as error the trial judge’s ruling that an attachment must be recorded pursuant to the lis pendens provisions, T.C.A. 20-301, to defeat the rights of a bona fide purchaser of the realty.

The American National Bank and Trust Company of Chattanooga commenced a suit on March 6,1975, against John and Laverne Wilds for a balance due of $4,898.96 on notes payable to appellant. Service was not perfected on the defendants and an amended complaint was filed on May 15, 1975, attaching real property owned by the defendants located in the county of suit. The attachment was executed on May 21, 1975. On May 15, 1975, the record reveals Ernest and Juanita Clemons paid a downpayment to the Wildses on the same property. The deed was executed and acknowledged on May 22, 1975, and recorded May 27, 1975. The suit filed by the Bank against Wilds resulted in a default judgment against Wilds entered September 9, 1975, and the final judgment ordering the sale of the property was entered on September 25, 1975, the same to take place in November 1975. The Bank did not record its attachment of the property nor the judgment lien resulting from the default judgment entered against the Wildses. The Clemonses received notice of this court action from the publication of sale in a local newspaper and filed a motion to intervene on October 24, 1975. The trial judge determined that the Bank’s unrecorded attachment and unrecorded judgment lien do not pre-empt the rights of a bona fide purchaser for value in realty, citing T.C.A. 25-501 et seq. and related statutes, and permanently enjoined the sale of the property.

The Bank maintains on appeal that an attachment under T.C.A. 23-635 does not have to be recorded to defeat the interest of a bona fide purchaser for value because the recordation requirements of the lis pendens chapter, T.C.A. 20-301 et seq., have no application to the attachment provision under T.C.A. 23-635.

There is no statute specifically requiring that an attachment be recorded. However, Chapter 375 of the Public Acts of 1967 has in effect established that attachments must be recorded for the protection of bona fide purchasers and encumbrancers for value. The Tennessee Supreme Court in Land Developers, Inc. v. Maxwell, 537 S.W.2d 904 (Tenn.1976), stated that “the 1967 Act . sharply limited the effect upon title to real property of the mere filing of a suit or even the obtaining of a judgment, and reflected a strong legislative policy to require recordation in the Register’s Office of an abstract by persons seeking priority over bona fide purchasers or encumbranc-ers.”

A thorough reading of the necessary statutes determines the present status of the law concerning attachments. The statutes to be considered are T.C.A. 23-635, sale after attachment; T.C.A. 20-301, lis pen-dens provisions; and T.C.A. 20-302, the exclusion of attachment from lis pendens requirements now repealed by the 1967 Act. In pertinent part, T.C.A. 23-635 states that “any transfer, sale, or assignment made after the filing of an attachment at law of property mentioned in the bill or attachment, as against the plaintiff, shall be inoperative and voidable, as elsewhere provided.” The statute specifically refers to the lis pendens chapter, T.C.A. 20-301 et seq. As a result of this reference, the legislative changes in the lis pendens chapter effected by the 1967 Act cannot be overlooked in applying the attachment provisions.

The 1967 Act repealed T.C.A. 20-302, the portion of the lis pendens chapter excluding judicial attachments from the recording provisions of the general lis pen-dens statute, T.C.A. 20-301. As a consequence, the general language of T.C.A. 20-301 includes attachments within its purview thereby requiring the filing of an abstract containing “the names of the parties to such suit, a description of the real estate affected, its ownership, and a brief statement of the nature and amount of the lien sought to be fixed.” T.C.A. 20-301. Until this abstract is filed, the rights of bona fide purchasers and encumbrancers for value are unaffected.

The cross-reference from T.C.A. 23-635 to T.C.A. 20-301 and the repealing of T.C.A. 20-302 clearly indicate that to defeat the interests of a bona fide purchaser, an attachment must be recorded. The record reveals that the appellant did not record its attachment. Therefore, the rights of the appellees are unaffected.

The 1967 Act further changed the existing law by amending T.C.A. 25-501 to provide that “. . . . Judgments and decrees obtained from and after July 1, 1967 in any court of record . . . shall be liens upon the debtor’s land from the time the certified copy of said judgment or decree shall be registered in lien book in the register’s office of the county where the land is located.” Appellant in this case did not record its judgment lien entered from the default judgment against the original property owners. Consequently, the rights of the appellees are not defeated because of this failure to record.

The judgment of the trial court below is affirmed with the costs taxed to appellant.

SANDERS and GODDARD, JJ., concur.


author: DENTON, Justice.

text:
    The STATE of Texas, Petitioner, v. Johnny RUMFOLO et al., Respondents.
    No. B-6005.
    Supreme Court of Texas.
    Dec. 31, 1976.
    Rehearing Denied Jan. 19, 1977.
    Carol S. Vance, Dist. Atty., Robert C. Bennett, Jr., Asst. Dist. Atty., Houston, for petitioner.
    Joe S. Maida, Houston, for respondents.
   DENTON, Justice.

This action was brought by the State of Texas, through the District Attorney of Harris County for forfeiture of cash claimed as gambling proceeds pursuant to Art. 18.18 Tex.Code of Crim.Proc. against respondent Johnny Rumfolo, Louis Thomas Adams, George Colonetta, Cullen Duoto, Vernon Duoto, Mike Jamail and Charles Messena. Following a raid on a dice game, Houston police seized cash from these respondents. Return was made to the justice court. After hearing, the Justice of the Peace ordered forfeiture of the proceeds. Appeal by trial de novo was brought to the county court at law. That court ordered the cash forfeited to the State. The court of civil appeals reversed and rendered judgment that the State return the proceeds, holding Art. 18.18(b) and (f) unconstitutional. 535 S.W.2d 16. We reverse the judgment of the court of civil appeals and affirm the judgment of the county court at law.

On March 12, 1975, these respondents were engaged in a dice game at 1506 Tabor Street, in Houston, Texas. Also present was an undercover policeman, C. D. Shu-mate. Other policemen, knowing that Shu-mate was present, raided the dice game. The policemen had a search warrant for a different address, 1509 Tabor Street. After raiding the dice game the policemen searched the participants and seized cash from the individuals’ pants pockets and from one person’s sock totaling $3,920. Shumate remained in the background and did not participate in the arrest nor searches and seizures. Shumate was supposed to have stepped outside at 11 p. m. to give a signal to the other policemen to begin the raid, but he lost track of the time and failed to do this. The other policemen became concerned for his safety and entered the apartment at 11:15 p. m. Cullen Duoto saw the police coming; and by the time they entered the garage apartment all the money used in the game had been pocketed or put in socks. Shumate was participating in the dice game with money whose serial numbers had been recorded.

The material portions of Art. 18.18 provide:

(a) Following the final conviction of a person for possession of a gambling device or equipment, altered gambling equipment, or gambling paraphernalia, for an offense involving a criminal instrument, or an offense involving a prohibited weapon, the court entering the judgment of conviction shall order that the machine, device, gambling equipment or gambling paraphernalia, instrument, or weapon be destroyed or forfeited to the state. If forfeited, the court shall order the contraband delivered to the state, any political subdivision of the state, or to any state institution or agency. If gambling proceeds were seized, the court shall order them forfeited to the state and shall transmit them to the grand jury of the county in which they were seized for use in investigating alleged violations of the Penal Code, or to the state, any political subdivision of the state, or to any state institution or agency.
(b) If there is no prosecution or conviction following seizure, the magistrate to whom the return was made shall notify in writing the person found in possession of the alleged gambling device or equipment, altered gambling equipment or gambling paraphernalia, gambling proceeds, prohibited weapon, or criminal instrument to show cause why the property seized should not be destroyed or the proceeds forfeited.
(f) If a person timely appears to show cause why the property or proceeds should not be destroyed or forfeited, the magistrate shall conduct a hearing on the issue and determine the nature of property or proceeds and the person’s interest therein. Unless the person proves by a preponderance of the evidence that the property or proceeds is not gambling equipment, altered gambling equipment, gambling paraphernalia, gambling device, gambling proceeds, prohibited weapon, or criminal instrument, and that he is entitled to possession, the magistrate shall dispose of the property or proceeds in accordance with Paragraph (a) of this article.

Since there was no conviction or prosecution following the raid and seizure, the justice court proceeded under Art. 18.18(b) and a forfeiture of the proceeds was ordered. There was a trial de novo pursuant to Art. 44.17 Code of Crim.Proc. in the County Court at Law No. 1 of Harris County. That court, sitting without a jury, ordered all cash forfeited to the State, except for the $664 found in the sock of Donald F. West. The undercover agent testified that the money used in the dice game went into the pockets of the players, and not into the wallets or socks of the players.

In this case we have a statutory forfeiture prescribed by the legislature in the exercise of the police power of the State. The right of the State, in the reasonable exercise of such power, to declare a forfeiture of the property of private individuals has long been recognized. Skipper-Bivens Oil Company v. State, 115 S.W.2d 1016 (Tex.Civ.App.1938, writ ref’d); Phariss v. Kimbrough, 118 S.W.2d 661 (Tex.Civ. App.1938, writ ref’d). A statute providing for the forfeiture of property used in the commission of a penal offense does not violate the constitutional guaranty that conviction of crime shall not work a forfeiture of estate. Phariss v. Kimbrough, supra.

Respondents argue, and the court of civil appeals has held, that because the burden of proof is placed upon the person found in possession of the property to show cause why it should not be forfeited, Art. 18.18 operates to deny due process of law. In support of its holding, the court of civil appeals relied on Gunn v. Cavanaugh, 391 S.W.2d 723 (Tex.1965) for the proposition that due process requires a placing of the burden of proof upon the party seeking a forfeiture of another party’s claimed right, where the right claimed is of high importance. In that case the Court held that due process requires that the burden of proof to show forfeiture of parental rights rested upon him who asserts the affirmative of the proposition and not upon the allegedly negligent parent. We do not regard this decision as controlling here. The determination of parental rights is not governed by the same rules governing property rights.

A statutory proceeding for the forfeiture of personal property is one in rem, not against the owner but against the property itself, and is a proceeding of a civil nature in that it does not involve the conviction of the owner or possessor of the property seized. State v. Meyers, 328 S.W.2d 321 (Tex.Civ.App.1959, writ ref’d n. r. e.); McKee v. State, 318 S.W.2d 113 (Tex. Civ.App.1958, writ ref’d n. r. e.).

In construing an Illinois forfeiture statute the U. S. Supreme Court in Robinson v. Hanrahan, 409 U.S. 38, 93 S.Ct. 30, 34 L.Ed.2d 47 (1972) held: “An elementary and fundamental requirement of due process of any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." See also State v. Garcia, 114 N.J.Super. 444, 276 A.2d 880 (1971); Sensenbrenner v. Crosby, 37 Ohio St.2d 43, 306 N.E.2d 413 (1974).

The money seized in this case was taken from the person of those engaged in gambling. Such gambling proceeds may be forfeited under Art. 18.18 only by judgment of the magistrate of the court to whom the return was made, after the person in possession of the proceeds had been notified in writing of the hearing, and given an opportunity to be heard. We construe Art. 18.18 to require the State to assume the burden to prove the proceeds were used in the gambling activity and to trace the money to the named respondents. As applied to this action, the statute clearly satisfies the constitutional requirement of procedural due process. State v. Richards, 157 Tex. 166, 301 S.W.2d 597 (1957). Here the trial court conducted an evidentiary hearing after notice in writing to the respondents. After the State offered testimony concerning the gambling by the named respondents and the results of the search following the raid, the respondents had an opportunity to present evidence. The record shows the respondents or their attorney were present but offered no evidence at the hearing. To require claimants to show the property or proceeds is not gambling equipment or gambling proceeds as the case may be, is compatible with the due process requirement that claimants receive notice and be afforded an opportunity to present their objections to such forfeiture. In this case the State has satisfied due process through its notice and the hearing afforded the parties.

Respondents also challenge the validity of the search and contend the money seized by the police was unlawfully obtained. The search warrant is not in evidence; however, it is undisputed it described the premises to be searched as a residence located at 1509 Tabor Street, Houston, Harris County, Texas. The search was conducted at 1506 Tabor Street in Houston. The court of civil appeals held that the faulty street number rendered the search warrant invalid as to 1506 Tabor Street. In view of the court’s holding the statutory scheme of forfeiture under Art. 1818(b)(f) unconstitutional and void, the court did not pursue the question of the validity of the search warrant and seizure because of probable cause.

Sergeant Troy Driscoll of the Houston Police Department testified that he and other officers had the garage apartment under surveillance for three consecutive Thursday nights. Officer C. D. Shumate, acting as an undercover agent for the Houston Police Department was present at all three Thursday night gatherings and had informed Sergeant Driscoll that gambling had taken place on the premises. He had been invited this particular evening to again participate in a dice game. Sergeant Driscoll had been informed of this fact. Several of the persons, who were later arrested, had been seen going to the apartment on the other evenings. These persons were known to the police as gamblers. Officer Shumate had arranged a signal with Sergeant Driscoll that Shumate would go outside at 11 p. m. He testified: “If for some reason I didn’t walk out at 11 o’clock p. m., that meant that I might have needed help.” When Shumate failed to go outside by the appointed time the officers went inside the apartment within 15 minutes and made the arrest and seized the money from those participating in the dice game. It is this money that was forfeited in the case at bar.

We hold that there was sufficient evidence for the trial court to conclude that there was probable cause for the arrests without a warrant and the subsequent search. Garcia v. State, 459 S.W.2d 839 (Tex.Crim.App.1970); Rangel v. State, 444 S.W.2d 924 (Tex.Crim.App.1969).

The judgment of the court of civil appeals is reversed and the judgment of the trial court is affirmed.