I represent a lot of commercial landlords, and, when there’s a payment default and they want to evict a tenant, there’s an early strategy question that they all face: (1) Do we sue for possession only; or (2) Do we sue for money and unpaid rent (through the date of the court hearing)?
It’s a nuanced question. Most landlords choose # 2, especially since detainer lawsuits are filed in General Sessions Court and, due to a little-known exception, you can take a huge money judgment in “small” claims court.
But, they’ll generally say, what about the unpaid rent for time periods after we get a judgment and evict them from the property? That’s a second lawsuit. Isn’t there a rule against two lawsuits on the same issues?
Yes, it’s called res judicata, which we talked about last year.
So, can you sue a tenant two times on the same lease agreement?
Yes, you can. The Tennessee Court of Appeals reaffirmed this answer yesterday, in BOP, LLC, et al. v. Plastic Surgery of Nashville, P.C., et al., No. M2019-00588-COA-R3-CV (Oct. 8, 2020).
In that case, the landlord won an eviction judgment for possession and for money in 2005 , which the tenant later paid in full. Then, apparently, the landlord filed more lawsuits (5 more, actually), over other damages. This last part did not make sense to me, so I’ll stick to the part I care about, the law.
The Court wrote that “[t]he law on successive actions states that ‘[s]uccessive actions may be maintained on the same contract or transaction whenever, after the former action, a new cause of action arises therefrom’.” Tenn. Code Ann. § 20-6-201.
From there, the Court reasoned that each and every installment default under a contract for long term payments creates a new default, since a “suit may be brought in successive actions upon each default in an installment for
the amount of that defaulted installment.” Farmers & Merchants Bank v. Templeton, 646 S.W.2d 920, 923 (Tenn. Ct. App. 1982) (citing Barnes v. Black Diamond Coal Co., 47 S.W. 498, 499–500 (Tenn. 1898) (holding that “[i]nstallments of rent are subject to the same rule as installments of money due, and an action may be brought as each installment falls due” and that “[a] new cause of action arises and becomes enforceable with every successive installment”).
Therefore, a later suit to recover rents that “had not accrued” at the time of the first judgment constituted a new cause of action.
While the outcome in this particular case turned on really specific facts, this opinion, generally, supports the legal conclusion that, if there had been post-judgment amounts owed, the landlord would have a new cause of action to collect those and would not have been barred by res judicata.
So, to go back to the early fork-in-the road: Is it worth it to sue for unpaid rent when you don’t yet know all your damages?
I think it is. Getting possession is only “step one” of a landlord trying to establish its ultimate damages. Then, it must clean, repair, and market the premises. Once a tenant gets into the space and starts paying rent, then, the landlord will have mitigated its damages and will have the ability to calculate what its true and total damages are. But, that process could take six months to a year.
If you’re already filing a lawsuit, why not go ahead and get a judgment for at least a partial amount now (since, in many cases, the landlord doesn’t go back to sue a second time).
Creditors Rights 101 