Nicholas Vaughn Morris

[This opinion is not intended for publication as the precedential effect is deemed limited.]
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE EASTERN DISTRICT OF TENNESSEE
In re
NICHOLAS VAUGHN MORRIS, 	No. 2:25-bk-50475-RRM
Chapter 7
Debtor.
M E M O R A N D U M
APPEARANCES:
Dean Greer, Esq. 	Jason L. Rogers, Esq.
Post Office Box 3708 	Post Office Box 869
Kingsport, Tennessee 37664 	Knoxville, Tennessee 37901
Attorney for Debtor 	Attorney for Knoxville TVA Employees Credit Union
Rachel Ralston Mancl, United States Bankruptcy Judge. 	This case came before the
court for an evidentiary hearing on December 11, 2025, on debtor Nicholas Vaughn Morris’
motion to avoid the judicial lien of Knoxville TVA Employees Credit Union on his residence
jointly owned with Courtney Brianna Hart. 	The court heard testimony from the debtor, Ms. Hart,
and Justin Thomas Briggs, a certified residential appraiser retained by the Credit Union.
Photographs of the interior of the residence, Mr. Briggs’ curriculum vitae, and Mr. Briggs’
SIGNED this 17th day of February, 2026
_____________________________________________________________
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appraisal report were admitted as exhibits. 	The debtor and the Credit Union filed a joint
prehearing statement stipulating certain facts and setting forth the issue to be decided: “Whether
the Credit Union’s lien impairs the Debtor’s exemption in real property and may be avoided
pursuant to 11 U.S.C. § 522(h)?” 	The parties’ prehearing briefs narrowed this contested matter to
only the value of the debtor’s residence. 	The court in ruling from the bench found the value of
the property to be $200,000 and stated that “[i]f an appeal is filed, the court reserves the right to
issue a written opinion with Findings of Facts and Conclusions of the Law.” 	The following
constitute the court’s factual findings and conclusions of law in accordance with Fed. R. Civ. P.
52(a), made applicable by Fed. R. Bankr. P. 7052. 	This contested matter is a core proceeding.
See 28 U.S.C. § 157(b)(2)(B) and (K).
I.
The debtor filed the petition commencing this chapter 7 case on April 29, 2025, along with
his verified schedules and statements. 	In schedule A/B the debtor listed real property located at
108 Gilmer Street, Kingsport, Tennessee, and stated that the value of the property was in his
“opinion $185,000 at most” because the “[p]roperty has termite issues and water damage.” 	The
debtor claimed a homestead exemption of $35,000 in the property in his schedule C. 	In schedule
D the debtor listed Appalachian Community Federal Credit Union as holding a deed of trust on
the property securing a loan balance of $114,123. 	Knoxville TVA Employees Credit Union was
also listed in schedule D with a judgment lien on the property in the amount of $17,477.92. 	In
his statement of financial affairs, the debtor indicated that the Credit Union had obtained its
judgment for a deficiency balance after the repossession of three vehicles, those being a 2016 Ford
Mustang, a 2023 Nissan Sentra, and a 2013 GMC Sierra.
The judgment attached to the debtor’s motion shows that on October 9, 2024, the Credit
Union filed an action in the General Sessions Court for Sullivan County, Tennessee, to collect
“[m]onies owed in the amount of $14,200.05, plus court cost, attorney fees, cost of collection, and
interest at the statutory rate.” 	The hearing was set for December 2, 2024, and on that date the
debtor and Ms. Hart appeared and agreed to entry of a judgment in the amount of $17,477.92.
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The judgment became a lien on their real property when the Credit Union recorded it with the
Sullivan County Register of Deeds on December 17, 2024, at Book 3633, page 665.
The debtor and Ms. Hart jointly purchased the property in March 2020 for $129,500, and
since then have resided there with their three children. 	The debtor stated that “[a]round nine
months into being there, … the flooding started happening …. 	It was leaching through the
foundation of the house due to not having any moisture barrier, coming though my storage room.
And all six rooms downstairs in a fully finished basement had standing ankle-high water
overnight.” 	Similar floodings happened on five more occasions before the debtor installed a
French drain at a cost of $2,700 for the materials. 	Installation of a French drain, the debtor said,
was a temporary measure to alleviate flooding by diverting water away from the residence through
a perforated corrugated pipe using rock both as a base and to cover the pipe. 	Since installing the
French drain about a year ago, the debtor stated that the flooding had not recurred. 	However, he
said that the basement remains damp from water seepage, and his family uses a dehumidifier to
remove a gallon and a half to two gallons of water each week. 	The debtor said that a better remedy
to alleviate the flooding would have been to use a water conduit encased in concrete and plumbed
into the existing plumbing of the residence, but he could not afford that solution. 	According to
the debtor, he would also have to install a moisture barrier on the foundation to permanently
prevent water intrusion. 	The debtor stated that his knowledge of flooding remediation comes
from the experience gained by “remodeling and renovation and home building with my dad for
eight years solid, and three years after that fact, off and on.” 	The debtor said much of his work
with his father involved forming and setting concrete, working with sheetrock, roofs, and rafters,
and lots of painting.
The debtor testified that the flooding had damaged the sheetrock in his basement and that
he would need to remove and replace the sheetrock four feet up from the floor in all the rooms
downstairs to remove the resulting mold. 	The debtor stated that the basement is “[l]ivable, but
the spores are still there. 	The mold’s still there.” 	In addition to the mold problem, the debtor
testified that termites have damaged the residence. 	The debtor discovered a termite infestation in
the residence in the spring after the first year of purchasing the property. 	The debtor paid McClain
pest control to treat the residence for termites, and he spent $3,600 to repair termite damaged walls
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and doorframes. However, the infestation recurred the following spring and the damage was
repeated. The debtor contacted Terminix but could not afford the treatment recommended by its
technician. While at the residence, the Terminix technician sprayed termiticide through a hole in
the wall where there is visible termite damage and provided a can of termiticide to the debtor
that he sprayed into the wall the following spring. Using photographs as he testified, the debtor
pointed out the visible damage to the walls and doorframes caused by termites. The debtor said
that the interior damage in one area “is at least to the studs on the opposite side of the wall
where the doorframe is that’s holding the doorframe.” With regard to spraying for termites, the
debtor said “I don’t know if that’s a fix, just like I don’t know if the French drain outside was a fix.”
The debtor concluded his testimony with his opinion of the property’s market value:
Q 	As a result of the problems with the house, what is your opinion of the
market value of your home?
A 	I know we, we have discussed seeing it at 187, but we go back to the
date of me signing this for this home, my, my loan. 	I’m paying one twenty-nine
five here. 	Knowing what I know now, I’da passed on this home. I wouldn’t have
bought it. 	So is it going to affect the future selling of the house, of course. 	And
the market value right now as it sits, it’s so high, so low. 	I couldn’t sell my home
and go buy another home.
Q 	But the actual price that you think, at best?
A 	I would, I would see it being closer to 160. 	If somebody really knocked
me down and I just wanted out of this house, yeah, they could have it.
Q 	Okay.
A 	-- personally. ‘Cause again, I paid one twenty-nine five. 	What’s
somebody else going to pay knowing the damages?
Ms. Hart corroborated the debtor’s statements regarding problems with the property from
flooding and termite infestations. 	She added that there is visible staining on the sheetrock from
the episodes of flooding and that her family uses moisture absorbers in addition to the dehumidifier
to help with the dampness problem. 	When asked about active mold, Ms. Hart said she assumed
it was behind the sheetrock because of the recommendation that the sheetrock be removed and
replaced. 	She also offered her own opinion when asked about the property’s market value:
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A 	My own personal opinion, yes. I would assess it at the 185. As far as,
like, if it would sell for that, I, you know, I can’t say. 	But I do know when you do
purchase a home, there is a, if you want to say tit-for-tat where you go back and
forth, you know, someone might say, “Oh, it’s worth 185, but I’ll give you 150.”
They come back and say, “No, I won’t take your 150, but I’ll offer you 160.”
Q 	Do you think the bargaining points would be based on the damage to
the property?
A 	I would say so, yes. And the termite damage.
Mr. Briggs is a Certified Residential Real Estate Appraiser with 17 years’ experience and
the owner of Tennessee Home Appraisals that operates in East Tennessee and Southwest Virginia.
According to Mr. Briggs, the Credit Union retained him “to go to the subject property at 108
Gilmer Street …, observe the property, do basic measurements, and observe readily available areas
in the home, photograph such, and then run our analysis and come up with our definition of fair
market value for the home.” 	Mr. Briggs opined the “final estimate of value based on the date of
October the 3rd, 2025, was $220,000.” 	The appraisal report at the conclusion of page 2 likewise
lists October 3, 2025, as the date of inspection. 	Mr. Briggs states in the “USPAP Addendum” to
the appraisal that “[s]ignificant contributions to this report were made by: Curtis Bowen (TN
Trainee Appraiser License #6058, Expiration date 09/23/2025) who was the sole individual
performing the appraisal site visit[.]” 	Nothing was said during the hearing about the expiration
of Mr. Bowen’s license on September 23rd, prior to his October 3rd site inspection, or his licensure
status at the time he made the inspection. 	In any event, Mr. Briggs’ knowledge of the property’s
defects was dependent on the observations of Mr. Bowen as Mr. Briggs did not visit the property
himself.
Mr. Briggs’ report indicates that the residence is a split foyer design built over 30 years
ago in 1994. 	On the lower portion of the exterior, the foundation walls are of concrete block
construction with the areas above ground covered by brick. 	The upper portion of the exterior
walls are wood framed covered by vinyl. 	The interior of the upper portion is 887 square feet
consisting of two bedrooms, one bathroom, and an area for the living/dining room and kitchen.
The basement is finished with two bedrooms, a laundry/bathroom, and a family room. 	Two
photographs are included in the report with the following notations: “There appears to be termite
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damage in basement – however the appraiser is NOT an expert in that field and further
investigation would be prudent.” 	The report itself states:
This appraisal is developed under the extraordinary assumption that the damage
observed in the subject’s basement is the result of an extensive termite infestation.
The estimated cost to cure this condition is approximately $20,000, which has been
addressed on the Sales Grid under the “Cost to Cure” adjustment line.
When asked during his direct examination if there were “[a]ny negative assumptions with
the property,” Mr. Briggs further explained:
A 	There, there were. It, it was observed that there’s what appears to be
termite damage throughout the home. That damage appears to be quite significant.
Because of our observing that feature or factor, we did have to address that the best
we could and in this case utilized a cost-to-cure adjustment, which is the industry
standard.
Q 	Now that cost to cure you reference, is that information located in the
bottom of page 3 in this report?
A 	Yes, sir, it is. It’s near the bottom of the, page 3 and also referenced on
the next page as well.
Q 	And what is the cost to cure that you factored into your estimate of value
of the property?
A 	Yes, sir. The cost to cure is overall an estimate to, to help with kind of
just looking at the overall marketability of the subject property and what it would
bring on the open market. 	We need to do a cost to cure to keep it in line with
market expectations and to value it accordingly to what we think someone would
pay for the home because of its deferred maintenance in this case. Deferred
maintenance just meaning any condition that would require repair, which in this
case would be that termite damage.
Q 	And what was the cost to cure that was factored into your analysis?
A 	$20,000.
Q 	Now does that $20,000 just include remediation of possible termites or
does that include other factors?
A 	This does not just include remediation. It’s an estimate of the overall
market impact on the home.
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On cross-examination Mr. Briggs stated that the debtor’s residence, like any property that
is purchased, will have unknown damage, and that a “cost to cure” is “my best attempt as a
professional to take into consideration not just the remediation of this issue in keeping with the
home, the home’s pricing, market expectations, but also to take into account the entrepreneurial
incentive to do such.” 	Mr. Briggs was asked to explain what he meant by entrepreneurial
incentive:
A 	No one wants to fix an issue for free. Anytime there is an issue, no
matter the extent, we like to build in some entrepreneurial incentive, which is just
incentive for a party to come in and do the work.
Q 	That’s not a, that’s just an, some sort of estimate you apply to your
overall numbers, but it’s not based on actual cost of repair?
A 	No.
Q 	Or --
A 	It would be incorrect in, in any residential appraisal valuation to say it’s
a straight cost of repair. That’s, that’s not accurate. That’s --
Q 	Okay.
A -- not what we do.
Q 	So, but basically, then, the $20,000 is just some sort of an estimate, but
not based on what it would cost to actually repair any damage?
A 	That’s incorrect. It’s definitely taken into consideration and I have in
my work file different estimates and, and printouts based on termite damage, which
is often very similar to foundation damage, which is similar to water intrusion. All
of those types of issues have a generalized cost-to-cure adjustment that can be
applied with reasonable certainty.
Q 	And, and all of these things that you’ve mentioned are, are negative
market conditions?
A 	They are, yes.
Q 	They reduce the price down?
A 	Yes, they do.
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Mr. Briggs’ cross-examination ended with debtor’s attorney returning to the question of
whether the termite infestation cost to cure estimate was adequate to reflect a reduction in the
market value and if any problems other than the termite damage were considered in the appraisal:
Q 	Would you agree that visible termite damage is going to be a very
serious negative factor to a potential buyer because you don’t know how much
damage there is?
A 	Typically, it is a significant issue.
Q 	And despite all that, this house is still worth $220,000?
A 	Yes, sir.
Q 	Did you take into consideration anything other than termite damage?
A 	Anytime we see termite damage, we are assuming that there’s some
potential moisture issues and/or that there have in the past been some moisture
issues. Termites typically, and I’m not an expert, but from what experts have told
me termites typically follow water.
So if we’re seeing visible signs of termites like exhibited in these photos, we can
assume there’s some moisture issues. Now that could be as small as, you know,
fixing guttering and putting a dehumidifier in a basement. 	It could be as large as
exterior renovation excavation. It could, could get extensive. It’s just hard to know.
Q 	So beyond the, the estimate you made for termite damage, did that also
include the water potential damage, potential mold in the house?
A 	It -- it -- we didn’t observe potential mold. 	Again, I’m not a mold
remediation expert. We didn’t observe those features. But definitely seeing the
apparent termite damage here, yes, the possibility of some water intrusion and/or
moisture issues were taken into consideration with that. They often go hand in hand.
Q 	So your opinion is the only reduction to be made for visible termite
damage and damaged walls in the basement, the mold that my client testified to,
that only, it would only affect the price by $20,000?
A 	It, it would have a significant reduction of $20,000, yes, sir.
On redirect Mr. Briggs was asked if “the cost to cure that you referenced, is that based on
objective criteria, or do you actually go out and get estimates on repairs for houses that need these
type of repairs?” 	He responded: “We do actually get estimates, in general. Typically, about
every other year, we will have a database of different estimates for features such as mold, termites,
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water intrusion. 	Unfortunately, they’re estimates. 	And oftentimes, they’re 15 around $20,000
because there’s so many unknowns.”
The appraisal report was prepared using a direct sales comparison of three other properties
with various adjustments being made and by applying a weighted average to arrive at a value for
the property of $240,000. 	Additionally, a negative adjustment was made for a $20,000 “cost to
cure” estimate for the termite infestation. 	Other than the material defect of the termite infestation,
Mr. Bowen did not observe any other problems with the residence during his site visit, including
mold or water intrusion. 	If Mr. Bowen had observed any other problems, Mr. Briggs would have
identified them in his appraisal report. 	Paragraph 5 of the report’s “Statement of Assumptions
and Limiting Conditions” states in pertinent part:
The appraiser has noted in this appraisal report any adverse conditions (such
as needed repairs, deterioration, the presence of hazardous wastes, toxic substances,
etc.) observed during the inspection of the subject property or that he or she became
aware of during the research involved in performing the appraisal. Unless otherwise
stated in this appraisal report, the appraiser has no knowledge of any hidden or
unapparent physical deficiencies or adverse conditions of the property (such as, but
not limited to, needed repairs, deterioration, the presence of hazardous wastes, toxic
substances, adverse environmental conditions, etc.) that would make the property
less valuable, and has assumed that there are no such conditions and makes no
guarantees or warranties, express or implied.
The report notes no problems with water intrusion, but rather on page 1 the report describes the
foundation as being free from any “Evidence of Dampness,” and no mention is made anywhere in
the report about mold or water stains on the sheetrock. 	As such, the appraisal did not include a
“cost to cure” adjustment for the problem with seepage of water through the foundation walls and
the resulting dampness and moisture that necessitates the use of a dehumidifier and moisture
absorbers. 	Nor did it include a “cost to cure” adjustment for the problem with mold and spores
that will require removal and replacement of the sheetrock damaged from the floodings.
II.
Section 522(f)(1)(A) of the Bankruptcy Code provides that a debtor may avoid the fixing
of a judicial lien on an interest of the debtor in property to the extent such lien impairs an exemption
to which the debtor would have been entitled. 	The parties agreed to calculate the extent of any
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impairment of the debtor’s homestead exemption by first assuming that the value of the debtor’s
interest in the property is one-half of the market value of the property, and then subtracting from
that one-half value both the debtor’s $35,000 homestead exemption and one-half of the $114,123
loan balance secured by the deed of trust, or $57,061.50. 	Thus, per the parties’ agreed calculation,
the impairment of the debtor’s homestead exemption will be calculated by subtracting $92,061.50
from one-half of the property’s market value. 	If the value of the property were $220,000 as the
Credit Union asserts, then the debtor’s homestead exemption would be impaired to the extent the
Credit Union’s lien exceeds $17,938.50. 	If the value of the property were $185,000 as claimed
in the debtor’s schedules, motion, and brief, then the debtor’s homestead exemption would be
impaired to the extent the Credit Union’s lien exceeds $438.50. 	If the value of the property were
$200,000, then the debtor’s homestead exemption would be impaired to the extent the Credit
Union’s lien exceeds $7,938.50.
The fair market value of the property is determined as of the date the bankruptcy petition
was filed. 	See 11 U.S.C. § 522(a)(2). 	The debtor has the burden of proof to establish impairment
of the exemption. 	See, e.g., In re Pace, 569 B.R. 264, 269 (B.A.P. 6th Cir. 2017).
In ruling from the bench at the end of the hearing, the court stated:
The court finds the value of the debtor’s home located at 108 Gilmer Street,
Kingsport, Tennessee to be $200,000. Mr. Briggs has appraised the home at
$240,000, but estimated the cost of remediation and an entrepreneurial incentive to
repair the home’s significant termite damage at $20,000, arriving at an appraised
valuation of $220,000.
The court assigned significant weight to Mr. Briggs’ appraisal because of
his background, his familiarity with the East Tennessee real estate market, and the
methodology used to appraise the home. 	However, the court finds the appraisal
does not fully take into account the market stigma the home would face because of
the existing water and termite damage, the unknown cost of remediation, the
unknown status of the termite infestation, and whether it is ongoing, the fact that
the flooding remediation is temporary, and the difficulties this would afford the
debtor should they attempt to sell the home to a potential purchaser, who may be
unable to obtain a loan to purchase the home because of the termite damage.
Using the stipulated amount of the loan secured by the deed of trust and the parties’ agreed
mathematical calculation for determining impairment, the court concluded that the debtor’s
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homestead exemption was impaired to the extent the Credit Union’s lien exceeds $7,938.50. 	An
order was entered “avoiding the judicial lien in part and fixing the amount of the judicial lien at
$7,938.50.” 	The order further clarified that “[t]his partial avoidance of the judicial lien against
the debtor’s interest in the residence in no way affects the Credit Union’s judicial lien on the
interest of joint owner Courtney Hart in the residence.”
The finding of the fair market value of the property was based on the court’s conclusion
that in addition to a standard cost to cure estimate for the termite infestation, the property’s market
value should also include negative adjustments for the property’s problems with water intrusion
through the foundation walls and the flood-damaged sheetrock that has mold, neither of which was
observed by Mr. Briggs and his team. 	At one point during his testimony Mr. Briggs
acknowledged that he had “different estimates and, and printouts based on termite damage, which
is often very similar to foundation damage, which is similar to water intrusion” [and that] “[a]ll of
those types of issues have a generalized cost-to-cure adjustment that can be applied with reasonable
certainty.” 	He went on to agree that each of the problems “are negative market conditions” and
“reduce the price down.” 	Yet, he stated that his team had not observed any evidence of water
intrusion or mold, and no reference was made to these factors in the appraisal report. 	As such,
the $20,000 standard cost to cure estimate Mr. Briggs applied to the property’s value pertained
only to the negative market condition caused by the termite infestation. 	The $20,000 downward
adjustment did not include the additional negative market conditions presented by the water
intrusion and mold.
Mr. Briggs stated that he had a “database of different estimates for features such as mold,
termites, water intrusion…. 	And oftentimes, they’re 15 around $20,000 because there’s so many
unknowns.” 	In fact, Mr. Briggs’ appraisal defines the “cost to cure” estimate for termite damage
that he applied to the value of the property as a “standard” cost to cure, i.e., a “standard” $20,000
guess because there are “so many unknowns.” 	However, what was unknown to Mr. Briggs was
not unknown to the debtor and Ms. Hart. 	The debtor and Ms. Hart were far more knowledgeable
of the defects in the residence, testifying not only to the termite infestation but to problems with
water intrusion and mold that were unnoticed and unaccounted for by Mr. Briggs and his team and
that would have had an impact on the property’s appraised value had they been observed. 	The
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potential impact of these additional defects is evident by Mr. Briggs’ statement that if there were
moisture issues in the residence, they “could be as small as, you know, fixing guttering and putting
a dehumidifier in a basement. 	It could be as large as exterior renovation excavation. 	It could,
could get extensive. 	It’s just hard to know.” 	Simply put, because Mr. Briggs had no knowledge
of the problems in the residence related to water intrusion and mold, he could not have included a
cost to cure estimate for each of them—standard or otherwise—in his appraisal report.
In conclusion, if the debtor and Ms. Hart attempted to market the property they would have
to furnish to any purchaser “[a] residential property disclosure statement … regarding the condition
of the property, including any material defects known to the owner” unless the purchaser waived
the disclosure. 	Tenn. Code Ann. § 66-5-202. 	The problems with water intrusion and flood
damaged sheetrock containing mold are material defects that would have to be disclosed, thereby
further reducing Mr. Briggs’ appraised $220,000 market value of the property. 	Mr. Briggs’
testimony acknowledged that separate problems with mold, termites, and water intrusion may each
reduce the market value of a property by an estimated cost to cure of “15 around $20,000 because
there’s so many unknowns.” 	Therefore, a reduction of $20,000 in Mr. Briggs’ appraised
$220,000 value is well below the separate standard cost to cure estimates of $15,000 to $20,000
each for mold and water intrusion that are in his database. 	The court’s resulting $200,000 market
valuation represents a 54% appreciation in value for the property over 5 years notwithstanding its
problems. 	The foregoing findings support a fair market value of $200,000 for the property.
# # #
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