Tennessee Funding, LLC v. William H. Worley

Two parties claim the authority to exercise the declarant’s rights under a declaration of restrictive covenants for a residential subdivision.  The original declarant, the developer of the subdivision, granted a security interest in all personal property associated with the subdivision, including “contract rights” and general intangibles, to the bank that financed the subdivision.  After the developer defaulted, the bank conducted a public sale of the personalty securing its debt and was the highest bidder at the sale.  A few months later, the developer fell into receivership, and the receiver sold the declarant’s rights under the declaration to a lot owner “free and clear of all liens and liabilities.”  The bank filed this action seeking a declaratory judgment regarding entitlement to the declarant’s rights and damages.  The lot owner moved for judgment on the pleadings.  The lot owner argued that the bank could not prove a superior claim because it had consented to and subordinated its security interest to the declaration.  The bank moved for partial summary judgment on its request for a declaratory judgment.  The trial court denied the motion for judgment on the pleadings and granted partial summary judgment to the bank.  We affirm.