Month: April 2025

The Next Frontier of Foreclosure Litigation could be over “irregular” sales.

When Tenn. Code Ann. § 35-5-117 (originally § 35-5-118) was enacted in 2010, foreclosure lawyers were terrified.

This was the first time that the Tennessee legislature limited a creditor’s collection rights after a foreclosure. And the text was pretty ambiguous.

The statute created two general scenarios where a debtor could fight efforts by a creditor to obtain a deficiency judgment after a foreclosure:

  • Where the debtor can make “a showing of fraud, collusion, misconduct, or irregularity in the sale process” (see Tenn. Code Ann. § 35-5-117(b)); or
  • Where the debtor can “prove by a preponderance of the evidence that the property sold for an amount materially less than the fair market value of property at the time of the foreclosure sale” (see Tenn. Code Ann. § 35-5-117(c)).

At the time, foreclosure attorneys focused on what “materially less” than “fair market value” meant. The legislative history of the statute revealed that the lawmakers pulled that phrase from divorce law, where a “material change in circumstances” could impact child custody decisions. (Not much guidance on foreclosure cases.)

Ultimately, the appellate courts found that 88%-90% of the last known appraisal was sufficient, with later opinions approving 80% bids. With this “mathematical” clarity, foreclosing lenders had some guidance to avoid traps under 117(c).

But what about the part we all overlooked, Tenn. Code Ann. § 35-5-117(b)? We took that part for granted because, seriously, does any lender or foreclosure attorney commit fraud, collusion, misconduct, or irregularity in the sale process?

I don’t ask this in a rhetorical way. It’s an interesting question, and, in light of customary foreclosure practices in Tennessee, I think it’s ripe for litigation.

Here’s an example, which you can try at home. Grab your local newspaper (assuming one still exists in your area), and look for the foreclosure notices. Pick the first one you see, and call the foreclosure attorney and see what happens.

In my experience, it’s likely that:

  • The attorney/staff will never answer your call/email.
  • The attorney/staff will not call/email you back.
  • If you do hear back, you will not be provided with any information other than what is in the sale notice.
  • In many situations, you will not even get confirmation whether the sale is proceeding or not.
  • There will be sale terms announced in the minutes before the sale, but those are only rarely shared with interested parties in advance. Things like: Whether buyers need to bring cash. If so, how much. When will closing happen. Whether buyers need be pre-qualified.

These are fundamental questions that any reasonable bidder would expect to be provided. If an interested party doesn’t get these answers in advance, then they simply will not show up or, if they do, will be unprepared to bid. This uncertainty and failure to communicate leaves foreclosure bidding to the low-ball bidders, who make their money by exploiting the ambiguity (and low bid prices).

The failure to respond to interested parties’ reasonable questions will chill interest in a sale and will reduce the number of potential bidders. This could rise to the level of a violation of the foreclosure trustee’s duties under the Deed of Trust and could, possibly, render the sale “irregular.”

Foreclosing lenders in Tennessee should consider subpart 117(b) and how they or their counsel handle sales. Sure, no lender thinks their sale is “irregular,” but, on the right facts, you never know how a court will rule.

A remembrance of Professor Tom Nenon and a Reminder of the Value of the Small Things

University of Memphis professor Tom Nenon passed away last week. I want to tell you a very small story about Tom, who had a very big impact on my life.

When I first met Tom Nenon, he’d hadn’t yet been made provost. He was just a professor in the (Memphis State) Philosophy Department.

This was in 1993, and I was starting my sophomore year, still struggling to find my way at a big university.

After a first semester in some difficult pre-med courses, I received a not-so-kind letter from the scholarship office over the Christmas holidays, informing me that, if my grades didn’t rise and exceed a certain threshold, I’d lose my full-ride (and then some) scholarship. My grades weren’t awful, but they were middling.

I was a first generation college student, and my first year was a bumpy ride. As the kid of a grocery store check-out clerk and a factory worker, I had no idea what college looked like or how I fit in there.

When I shared the letter with my family over the holiday break, my parents just shrugged their shoulders and said something to the effect of “Oh well, you tried. College isn’t for everybody.” It’s crazy, but also completely understandable. They had worked every day of their lives to build a great home and life, and they simply didn’t see why their healthy, smart 18 year old son would waste 4 of his prime working years.

It was nice to not get fussed at, but it was also pretty clear that, if I lost this scholarship, it was my problem to solve and, maybe, the end of college for me.

I was terrified. What scared me the most was that my grades weren’t the result of too much fun or partying or enjoying the college life-style. Instead, I was trying as hard as I could and, for the first time in my life, began to wonder if I was good enough to succeed.

I’d love to tell you that the second semester of my freshman year was all redemption and great successes. Nope, it was still really hard. In the end, I got my grades just up enough to keep the scholarship, with Biology II and General Physics making sure to keep me in doubt about my future.

The next year, my sophomore year, I avoided all the science classes. My parents–who were confused why I was even at college–were even more confused to hear about my studies in Sociology, Communication, and Classical Issues in Philosophy.

I was still a bit lost, but felt like, maybe, I was heading in the right direction.

Then I met Tom Nenon, my Philosophy 1101 professor.

If you’ve read this far, you’re probably expecting to hear about an internship or research project or some mentorship that grew into a life-long friendship. This is not that.

Here’s what Tom did for me. A few months into the semester–maybe in October–at the end of a lecture, he asked if “David Anthony was present and could meet me in my office.”

It was big lecture class, with about 75 students, and I remember the looks on my friends’ faces wondering what I had done. I was also a little bit concerned.

In his office, he greeted me as if I was a long-lost friend, and he sat me down and told me how impressed he has been with my work in class. He asked if I had ever considered studying philosophy, and he gave me a sales pitch about the department, the students and faculty, and all the things I could do with a philosophy degree (by that time, I had vaguely identified a law degree as a possible path). I felt like a 5 star point guard in the basketball facility. It was awesome.

In the end, I didn’t become a philosophy major. I took 3-4 more philosophy courses, but followed my heart into the English department. Other than a few hi’s and how are you’s, I’m not sure I talked much with Professor Nenon after that.

But here’s why I’m posting all this. After that day in his office, I never questioned whether I belonged on that campus. I also never questioned taking courses that I was passionate about. I never made anything less than an “A” in any class. And I never forgot the guy who not only saw my potential but made sure to celebrate and encourage it.

When Nenon was appointed Provost years later, I emailed him to congratulate him but also to share my gratitude for that very small moment that had such a ripple effect on my own journey.

His response was very kind and effusive, and I wish I still had it.

But, having read more about his life and passion for others, I am sure that I am just one of the thousands of students, friends, and colleagues whose lives and journeys were touched by Tom, and I’m so glad I was able to thank him, even if it came 20 years after the fact.

It’s a reminder how often we have the ability to help or encourage somebody, with the smallest gesture, and how easy it can be.

Thanks for the final lesson, Professor Nenon.