JCR, LLC v. Hance

• Docket Number: E2022-00765-COA-R3-CV
• Decision Date: 28 August 2023
• Parties: JCR, LLC ET AL. v. VICKI HANCE ET AL.
• Court: Tennessee Court of Appeals

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JCR, LLC ET AL. v. VICKI HANCE ET AL.

No. E2022-00765-COA-R3-CV

Court of Appeals of Tennessee, Knoxville

August 28, 2023

Session Date: May 16, 2023

Appeal from the Circuit Court for Knox County No. 2-421-17 William T. Ailor, Judge

Purchaser of real property at a non-judicial foreclosure sale brought an unlawful detainer action against the original homeowners when they refused to vacate the property after the sale. The homeowners brought a separate action against their mortgage servicer and the purchaser alleging, inter alia, wrongful foreclosure. The trial court dismissed the homeowners' complaint against the purchaser and granted the purchaser's motion for summary judgment with regard to the detainer action because there was no genuine issue of material fact as to whether the purchaser was entitled to possession of the property. Finding no error, we affirm the judgment of the trial court.

Tenn R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed; Case Remanded

James R. Moore, Knoxville, Tennessee, for the appellants, Vicki Hance and Ernest Hance.

A Scott McCulley, Maryville, Tennessee, for the appellees, JCR, LLC.

KRISTI M. DAVIS, J., delivered the opinion of the Court, in which W NEAL MCBRAYER, J., joined. D. MICHAEL SWINEY, C.J., filed a separate dissenting opinion.

OPINION

KRISTI M. DAVIS, J.

This is an appeal from a detainer action following a foreclosure sale of a parcel of real property owned by Vicki Hance ("Mrs. Hance") and Ernest Hance ("Mr. Hance"). The Hances purchased a home in 2007 and financed the purchase by executing a Deed of Trust securing their obligations under a promissory note for $80,000. In 2017, following a series of assignments of the Deed of Trust and promissory note, the mortgage was owed to U.S. Bank National Association and was serviced by Nationstar Mortgage, LLC ("Nationstar").

The Hances defaulted on their payment obligations under the promissory note in 2017. As a result of their default, the property was scheduled to be sold at a foreclosure sale on August 8, 2017. On July 7, 2017, the Hances received notice of the foreclosure sale from the foreclosing Substitute Trustee, Shapiro &Ingle, LLP ("Substitute Trustee"). The notice provided that all future inquiries or written requests regarding the matter should be directed to Substitute Trustee.

Section 19 of the Deed of Trust provides:

19. Borrower's Right to Reinstate After Acceleration. If Borrower meets certain conditions, Borrower shall have the right to have enforcement of this Security Instrument discontinued at any time prior to the earliest of: (a) five days before sale of the Property pursuant to any power of sale contained in this Security Instrument; (b) such other period as Applicable Law might specify for the termination of Borrower's right to reinstate; or (c) entry of a judgment enforcing this Security Instrument. Those conditions are that Borrower: (a) pays Lender all sums which then would be due under this Security Instrument and the Note as if no acceleration had occurred; (b) cures any default of any other covenants or agreements; (c) pays all expenses incurred in enforcing this Security Instrument, including, but not limited to, reasonable attorneys' fees, property inspection and valuation fees, and other fees incurred for the purpose of protecting Lender's interest in the Property and rights under this Security Instrument; and (d) takes such action as Lender may reasonably require to assure that Lender's interest in the Property and rights under this Security Instrument, and Borrower's obligation to pay the sums secured by this Security Instrument, shall continue unchanged....

(Emphasis added). Following their receipt of the notice from the Substitute Trustee, Mrs. Hance communicated with multiple Nationstar agents at various times between July 10 and August 7. These communications involved attempts by Mrs. Hance to obtain a letter from Nationstar that would allow the Hances to make a withdrawal from Mr. Hance's 401(k) plan to cure their default and exercise the right of reinstatement provided in Section 19 of the Deed of Trust. There is nothing in the record to suggest that either of the Hances ever communicated - or attempted to communicate - with the Substitute Trustee during this time. Ultimately, the Hances wired $6,771.16 to Nationstar late in the day on August 7, 2017.

The foreclosure sale proceeded as scheduled on August 8, and the property was purchased by JCR, LLC ("JCR"). The Hances refused to vacate the property after the sale, and JCR filed a detainer action seeking possession of the property in Knox County General Sessions Court on October 9, 2017 (the "Detainer Action").

On November 13, 2017, the day before the Detainer Action was set to be heard, the Hances filed suit against Nationstar and JCR (the "Lawsuit") in the Knox County Circuit Court (the "trial court"). The Hances' Complaint filed in the Lawsuit included claims of: (1) wrongful foreclosure, (2) fraudulent and/or negligent misrepresentation, (3) breach of contract and breach of implied covenant of good faith and fair dealing, (4) violation of the Tennessee Consumer Protection Act, (5) intentional or reckless infliction of emotional distress, and (6) libel of title. The Hances also filed a lien lis pendens with respect to the property. The Hances do not dispute that they were in default of their obligations under the Deed of Trust, nor do they dispute that they received the requisite notice of the acceleration of the amounts owed and the pending foreclosure sale. Instead, the Hances allege that Nationstar intentionally hampered the Hances' attempts to reinstate under Section 19 of the Deed of Trust in order to foreclose on the property.

Nationstar and JCR each filed a motion to dismiss the Lawsuit pursuant to Rule 12.02(6) of the Tennessee Rules of Civil Procedure. JCR argued that it was a bona fide purchaser of the property and that, as a result, the Lawsuit should be dismissed as to JCR and the lien lis pendens should be released. In response to JCR's motion, the Hances argued that they had "clearly ple[d] that Nationstar violated the terms of the Deed of Trust and thus JCR's deed is void." In response to Nationstar's motion, the Hances conceded that "[t]here is no dispute that the [Hances] were behind on their mortgage payments or that they had the right to reinstate the mortgage." After a hearing, the trial court denied Nationstar's motion to dismiss and, in a separate order entered June 4, 2018, granted JCR's motion to dismiss. In its order granting JCR's motion, the trial court found that JCR was a bona fide purchaser of the property and dismissed the Lawsuit against JCR with prejudice.

By agreed order of the Knox County General Sessions Court, the Detainer Action was removed to the trial court pursuant to Tennessee Code Annotated section 16-15-732. Thereafter, JCR filed a "Motion for Judgment Based on Res Judicata and in the alternative Motion for Summary Judgment" in the Detainer Action. The portion of JCR's motion based on res judicata was premised upon the trial court's June 4, 2018 order wherein the trial court found that JCR was a bona fide purchaser of the property and dismissed the Lawsuit against JCR with prejudice. Alternatively, JCR argued that it was entitled to summary judgment because it purchased the property at the foreclosure sale, it is a bona fide purchaser of the property, and title to the property is now vested in JCR. In response, the Hances argued that the June 4, 2018 order was not a final order and therefore had no res judicata effect. The Hances also argued that the "foreclosure did not comply with the terms of the Deed of Trust" because the Hances "were thwarted and defrauded out of their right to cure the default according to the terms contained in their Deed of Trust." The Hances also denied that JCR was a bona fide purchaser of the property. Therefore, the Hances argued, the foreclosure sale should be set aside as JCR "does not have sufficient title . . . to force [the Hances] from their home[.]" While JCR's motion was pending, the Detainer Action and the Lawsuit were consolidated by order of the trial court.

Following a hearing on JCR's motion, the trial court found that JCR, "pursuant to a foreclosure," purchased the property at a publicly conducted trustee's sale, that the Hances did not appear at the foreclosure sale or otherwise put any potential buyers on notice that they had a claim against the property, that JCR was the successful purchaser and was a bona fide purchaser of the property, and that nothing in the public record would put anyone on notice of a claim on behalf of the Hances. Therefore, the trial court granted summary judgment in JCR's favor and granted JCR possession of the property. The Hances moved the trial court "to expand upon its findings to specifically state that their defense of Wrongful Foreclosure is not applicable to a detainer lawsuit filed by JCR, LLC because it is a Bona Fide Purchaser for Value." The trial court denied the Hances' motion to expand upon its findings. Following additional motion practice,^[1] the Hances timely appealed the trial court's dismissal of JCR from the Lawsuit and grant of summary judgment in favor of JCR in the Detainer Action to this Court.

ISSUES

The Hances raise the following issues on appeal, which we have restated slightly:

1. Whether the trial court erred in dismissing JCR from the Hances' lawsuit in which the Hances asserted wrongful foreclosure against Nationstar.

2. Whether the trial court erred in granting summary judgment and possession of the real property to JCR when the Hances asserted wrongful foreclosure as an affirmative defense to JCR's detainer action.

STANDARD OF REVIEW^[2...