When it’s an option, I always encourage clients to file lawsuits in Tennessee’s General Sessions Courts. Justice moves fast, efficiently, and cheap. The lawsuit you file today could be set for hearing next week; executions on the judgment could go out by the end of the month. Zip zap.
Nevertheless, lawyers often express uncertainty about whether a judgment from General Sessions Court–not a “court of record”–is enforceable in another state under under that state’s version of the Uniform Enforcement of Foreign Judgments Act (UEFJA).
I think they are. Here’s why.
If your General Sessions judgment is final and enforceable in Tennessee, why can’t you take to another state? “Foreign judgment” means “any judgment, decree, or order of a court of the United States or of any other court which is entitled to full faith and credit.” See Tenn. Code Ann. § 26-6-103.
In layman terms, it’s a judgment from another U.S. state court. Based on that, a Tennessee General Sessions judgment qualifies so long as the rendering court had jurisdiction and the judgment is valid and final, right?
“Final” in General Sessions Court is determined under Tenn. Code Ann. § 27-5-108, which says generally that any judgment that isn’t appealed within ten days. If you can garnish a bank account and wages on the judgment, why can’t you take it to another state?
So, yes, maybe small claims court has a more “vibrant” cast of characters than your typical courtroom, but that doesn’t mean the judgements granted there have any less legal impact.
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.)
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.
Tennessee offers a unique pitfall for the unwary: It’s a “two track” state, meaning that a foreclosing lender must satisfy the requirements of both the Tennessee foreclosure statutes and the requirements agreed to by the parties in the Deed of Trust.
And those two tracks don’t always align.
On that note, let me tell you about the sale of a multi-million dollar property I watched on October 31 .
The Notice of Foreclosure Sale was first published in the Nashville Ledger on October 11, 2024 , and the sale was set for October 31, 2024 at 10AM at the Davidson County Courthouse.
That’s a tight timeline, since Tenn. Code Ann. § 35-5-101(b) requires that “The first publication shall be at least twenty (20) days previous to the sale.” In fact, by my own math, the 10/31 sale date fell on the twentieth day after publication, and I wondered whether, legally, this sale satisfied this statute (maybe, maybe not).
It didn’t matter, because I then read the Deed of Trust.
The Deed of Trust adds an extra day to § 35-5-101(b) minimum and requires that the first publication precede the sale by 21 days. This sale clearly didn’t satisfy that requirement.
About 6 bidders attended the sale, but none of them bid. The bank bought the commercial property for nearly $4 Million, and, in the Trustee’s Deed, recited the following:
Did the foreclosing lender double-check the Deed of Trust text? Is this a valid sale? Did good title convey from this sale? Did the failure to follow the terms of the Deed of Trust chill the bidders’ interest? Would this qualify as an “irregular” sale that would prevent collection on any unpaid debt pursuant to Tenn. Code Ann. § 35-5-117? Lots of interesting issues flowing from this sale.
I don’t like “interesting issues” on my foreclosures. When I prepare a sale notice, I check and double-check everything. When I’ve got a bunch of foreclosures set, you’ll find pen dots all over my calendar, from all the day-counting.
Foreclosures are complicated, and the failure to get it right can result in a challenge from all different directions. A borrower who doesn’t want to lose the property. A buyer who may not receive clear title. A lender who expects you to follow the process. A bankruptcy trustee who wants to blow it all up.
It’s a tricky process, and there’s too much risk when making an error. None of the goblins who visited my house later that night scared me more than what I saw happen at that foreclosure.
The Tennessee Supreme Court hasn’t yet issued a ruling in the Terry Case v. Wilmington Trust case, which was argued before it nearly a year ago. It’s an important case for foreclosure attorneys, since the case will decide what impact an (allegedly) defective foreclosure sale has on title: Does the sale convey valid title or not?
That’s the “big picture” issue, but the case also touches on an important mechanical issue: Whether an attorney can rely on the clear text of Tenn. Code Ann. § 35-5-101(f) when continuing foreclosure sales for less than 30 days.
In Case, the “boilerplate” text of the deed of trust required all notices by either party to be in writing. But, in the foreclosure statutes, Tenn. Code Ann. § 35-5-101(f)(3) expressly a creditor to continue a foreclosure upon an oral announcement, if the continuance is for less than 30 days. Because the attorneys for Wilmington only made an oral announcement of the continuance and didn’t mail a notice, the borrower argued, they failed to comply with the “written notice” terms of the Deed of Trust. The Tennessee Court of Appeals agreed with the borrower, and it deemed the sale possibly invalid.
It’s an important question because nearly every Tennessee Deed of Trust will impose a duty on the parties to provide notices in writing. It’s a standard provision, designed to make sure that oral statements don’t amend, waive, or release the rights held by either party under the loan.
In fact, I’m preparing a foreclosure today, and the final provisions of deed of trust I’m foreclosing on has a “Notices” paragraph that says: “Any notice required to be given under this Deed of Trust, including without limitation any notice of default and any notice of sale shall be given in writing, and shall be effective when actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail. as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Deed of Trust.”
With the Tennessee Supreme Court’s decision looming, Tennessee foreclosure lawyers don’t have the clarity on how to reconcile these different directives.
But, having said that, until the Supreme Court decides, a smart foreclosure attorney will-as I’ve recommended in the past–always comply with the most onerous of all of the requirements, no matter if they are in the deed of trust, a loan agreement, or the foreclosure statutes.
One of the scary things about a non-judicial foreclosure in Tennessee is that it’s all “paperwork,” and there’s no judge involved…until a party challenges the process. You don’t know you’ve messed something up until long after the fact. Foreclosures are careful, deliberate work, and not for the faint of heart. When in doubt over the requirements, I follow them all.
In common parlance, a “squatter” is a person who takes possession of property without any rightful claim. In my mind’s eye, I picture a modern-day pirate, moving into your home and declaring “This is MY house now!”
In my 25 years of eviction and property litigation, I’ve actually never dealt with a squatter. I’ve certainly never perceived it to be a problem that justified special legislative attention.
Effective July 1, 2024, we now have Tenn. Code Ann. § 29-18-135, titled “Limited alternative remedy to remove unauthorized persons from residential real property.” This statute is added to the end of Title 29, Chapter 18, which are the eviction and detainer statutes.
This new statute creates a process by which a property owner can, by filling out a checklist form, direct the Sheriff to remove an “unauthorized person” from the property, without a court proceeding.
By its clear text, “a property owner…may request from the sheriff of the county in which the property is located the immediate removal of any person unlawfully occupying a residential dwelling pursuant to this section if…[a]n unauthorized person has unlawfully entered and remains on the property owner’s [residential] property” and “[t]he unauthorized person is not a current or former tenant…” (this is heavily paraphrased, so be sure to look at subpart (d) in full).
The word “squatter” isn’t in this statute. Instead, the statute deals with “any person unlawfully occupying a residential dwelling” who “has unlawfully entered and remains or continues to reside” on the property and who “is not a current or former tenant…” and “is not an immediate family member of the property owner.”
That’s a pretty broad definition, and it seems to include persons not routinely labelled “squatters.” For instance, wouldn’t a foreclosed homeowner be subject to this statute? They are no longer the “owner,” they aren’t a “current or former tenant,” and if they stay at the property after the foreclosure deed is recorded, the possession is “unlawful.”
In my experience, “squatters” simply haven’t been a bane to Tennessee property owners’ existence. I’m not saying it never happens (and I’m sure that all it takes is one years’ long fight with a squatter to change my mind), but it seems like the existing statutes provide a good remedy, and, at best, this statute puts an awkward amount of judicial discretion into the hands of the local sheriff (who probably would rather all this be decided by a judge).
I was shocked to see–on the national news–that Graceland was facing foreclosure. A few days later, it all just…went away and explained as a hoax. I was surprised, but not totally surprised by these strange turn of events. It rarely happens, but foreclosures in Tennessee are ripe for exploitation by bad actors.
At its most simple, Tenn. Code Ann. § 35-5-101 requires a lender to: (1) publish a notice of the sale 3 times in a local newspaper; and (2) send a copy of the notice to the property owner by certified mail. With just a bit of paperwork, voilà, you can sell somebody’s property.
It’s a cost efficient process for legitimate lenders, but it can be exploited by fraudsters and and paper terrorists, who present bogus claims and hope that their efforts will be ignored or not challenged.
Once a foreclosure is started, there are limited ways for a property owner to stop it, short of filing bankruptcy or filing a lawsuit to obtain an injunction pursuant to Tenn. Code Ann. § 29-23-201 (which is as complicated as it sounds–Graceland’s lawyers filed a 61 document to stop this sale).
When I saw the news about Graceland’s foreclosure, I immediately looked up the Notice of Foreclosure Sale published by Naussany Investments and Private Lending LLC, and noticed red flags. The Deed of Trust had been not been recorded; the lender didn’t have an attorney; and the Notice of Sale lacked the level of detail a typical lender foreclosing on a historic, world-famous property would include.
As bizarre as all this was, here’s the scary part: This could happen to anybody in a non-judicial foreclosure state. Here, the fraudsters were simply too ambitious, picking a famous property owned by a deep-pocketed and litigious owner.
What about properties by people who don’t understand the process, don’t read the newspaper and/or sign for certified mail, don’t have access to lawyers, or don’t have the money to fight? There are no official safeguards in the system to protect homeowners.
The newspaper doesn’t question the validity of the lender’s claims in submitted advertisements. The mailman doesn’t either. Once the sale is over, the local Register of Deeds just checks for valid notary stamps and payment of the transfer taxes. In some cases, by the time the owner discovers the fraud, there’s already a new deed recorded.
In 2016, I wrote an article for the Nashville Bar Journal titled, “Is your Potential Client a Nigerian King?” As part of that, I learned something wild about the email scammers’ unique business model: They expect to fail 99% of the time. They aren’t bothered by that fail rate, though, because they know that the upside to a single victory justifies all the work.
Sure, these scammers failed to foreclose on Graceland, but how many other times have they succeeded? And how many more times are they going to try?
I have a question I ask clients when they ask me to foreclose on a property.
“Do you want the money or do you want the property?”
Some clients are baffled by the question. They are banks, they’ll tell me, and what are we going with a property? Who is going to evict the tenants, change the locks, make sure the pipes don’t burst, cut the grass and so on? The banks don’t want all that trouble. They want the money back, plain and simple.
But, in a hot real estate market like Nashville, I’ve noticed a new type of lender. I refer to them as “loan-to-own” lenders. They are making loans secured by real property, but they sometimes act like property investors.
My hunch is that, when making the decision to extend credit, the prospect of ending up owning the property is part of these lenders’ motivation in doing the deal. Hence, the “loan-to-own” nickname I give them. When their loans go bad, these lenders are happy to foreclose and take ownership of the land.
These are often lenders of last resort, for a property developer who can’t get credit (or more credit) from a traditional lender. These loans are often at far-above-market interest rates and usually on pretty short repayment terms. The typical customer is a developer who just needs a little bit more money or a bit more time, and who, out of desperation or arrogance, believes that the “big” sale is just 90-120 days away and is willing to overlook the costs and risks.
When the sale doesn’t happen or a payment is missed, these lenders pounce. In some cases, maybe the property developer can figure something out and the loan (and the hefty interest and fees) gets paid.
Or, worst case, the lender presses forward with a lender-advantageous foreclosure, i.e. one in which the lender who wants to win at the sale is the one who gets to set and enforce the sale terms.
Over the last few years, I’ve seen more lenders from Texas, Las Vegas, and California loaning money on development deals in Middle Tennessee. I’ve also noticed more of these lenders foreclosing, taking ownership, and then offering the properties for sale.
Having said all this, I don’t expect (or offer) much sympathy for the cash-strapped property prospectors. It’s simply an interesting development in the gold-rush ecosystem of the modern Nashville real estate market.
If I know where a judgment debtor banks, I’m half-way to collecting on my judgment. That is, of course, until the bank responds “Account Closed” to my bank levy.
What then?
You have to make some lemonade with the lemons, I guess. “Account Closed” suggests that, at some point, the debtor had an account there. If I can’t capture money, maybe I can figure out where it all went.
One way to do that is to subpoena the bank’s records for the time periods that the account was active. To do that, a Tennessee creditor has to comply with the Tennessee Financial Records Privacy Act, found at Tenn. Code Ann. § 45-10-101 et. seq.
The purpose of the Act is to protect a bank customer’s privacy, and the Act prevents Tennessee banks from arbitrarily releasing customer records (where the customer hasn’t authorized the release).
This sounds complicated, but compliance isn’t particularly difficult. The basic requirements are spelled out in the Act: (i) the customer must get notice of the subpoena and an opportunity to object (Tenn. Code Ann. T.C.A. § 45-10-106 ); and (ii) the requesting party must satisfy a number of technical requirements, spelled out at § 45-10-106 (15 days minimum to respond; sufficient identifying information must be provided; a bond).
In response, the bank will provide signature cards and account statements for the time periods requested. The records will show how much came in, how much went out, and where it all went.
Having looked at 100s of responses from Banks, I will tell you: Bank records don’t lie, and they always tell a story. Some involve luxury purchases, vacations, and restaurants I’ve never heard of (and couldn’t afford). Some confirm that maybe the debtor has, in fact, gone broke. Some will lead to other banks and other records to be subpoenaed.
In short, knowing how to subpoena records under the Financial Records Privacy Act is a powerful tool and not particularly hard to get right.
Honestly, the hardest part is knowing what bank to send the subpoena to.
I totally agree with the outcome, but I also feel weird about the Clerk’s Office simply deciding that we’re not going to follow a very clear (yet really dumb) statute. I didn’t realize we had a choice.
In an apparent rush to be as unfriendly to tenants as possible, the Tennessee Legislature has upset lawyers for both tenants and landlords.
I’m talking about the new Tenn. Code Ann. § 27-5-108 (d), which became effective July 1, 2023.
The prior version said:
(d) If no appeal is taken within the time provided, then execution may issue.
The new version says:
(d)(1) Except as provided in subdivision (d)(2), if no appeal is taken within the time provided, then execution may issue.
(2) For a writ of possession, if no appeal is taken within the time provided, then execution shall issue by operation of law.
Do you see the difference? Under the new (d)(2), a writ of restitution “shall” automatically issue after an eviction judgment.
Some quick background: A “detainer /eviction judgment” is the court order that says a landlord is entitled to possession of the property, usually due to lack of payment of rent or some other breach under a lease. A “writ of restitution” is the subsequent legal paperwork that directs the Sheriff to physically remove a person (and all their stuff) from the property.
To be clear, the entry of the former one does not necessarily require the issuance of the latter.
In most cases, no Writ is ever needed. Most tenants act fast in response to the mere threat of having the Sheriff show up, unannounced, with hired labor to physically remove them and move all their possessions to the street.
Most landlords reach out to the tenant and do everything in their power to accommodate a reasonable and peaceable move-out, to avoid the cost and mess of having the Sheriff throw out all of a tenant’s stuff.
And, sure, not all evictions are the same, and there will always be a few–the “worst of the worst”–where the Sheriff’s help is needed. But those are a rare exception.
As a landlord-tenant lawyer, of the 500 eviction judgments I’ve won, I’d guess that I’ve issued less than 10 writs of restitution.
Why on earth did the 2023 Tennessee Legislature decide that each and every eviction judgment needs this immediate and atomic action? This makes no sense, as a matter of policy or practical application.
Tenant lawyers hate it. Landlord lawyers hate it. I’m guessing the Sheriff’s Office hates it (or will hate it).
Just today, I filed an eviction judgment with the Court and, as part of the filing process, I was forced to also to pay the $67.00 Writ of Restitution fee. Neither I nor my client want that process to issue.
The only people who think this is a good idea is the Tennessee Legislature.
Creditors Rights 101 