Earlier this week, a lawsuit was filed in Davidson County Chancery Court by a landlord to collect $130,697.44 in unpaid rent from a Romano’s Macaroni Grill located in Rutherford County. There was no allegation that any of the facts of the case occurred in Davidson County or that the parties contractually agreed that the venue for any disputes would be in Nashville.
Should this lawsuit be dismissed for improper venue, where the business, all operations, and the leased premises were all in Rutherford County?
Not necessarily. Here’s why: All of the Defendants use corporate registered agents whose offices are based in Davidson County, and that subjects them to venue in Davidson County.
When analyzing venue for causes of action under Tenn. Code Ann. § 20-4-101(a), a defendant can be “found” in “any county wherein it has an office for the furtherance of its business activities.”
Tennessee courts have said that a registered agent’s address is an office for the furtherance of the defendant’s business activities, and it doesn’t matter that the defendant doesn’t actually operate a business out of that address or doesn’t otherwise have any other connection to that county. See Fed. Exp. v. The Am. Bicycle Grp., LLC, No. E200701483COAR9CV, 2008 WL 565687, at *3 (Tenn. Ct. App. Mar. 4, 2008).
Maybe this isn’t a big deal–most of these corporate agents are located in Davidson County, and Nashville uniformly has very strong courts and judges.
But, Tennessee is a very, very long state. It’s definitely something to keep in mind when you’re a company in Greenville or Memphis, and you’re selecting a registered agent.
Last week, a local collections lawyer conceded, in open court, that collection cases rarely have interesting issues involved. This case was different, the lawyer argued, because it involved interpretation of Tenn. Code Ann. § 35-5-118(d), which has not yet been discussed in any Tennessee opinion.
This is the new foreclosure deficiency statute, and I’ve dealt with this law a few different times. Here’s a blog post about the first judicial opinion defining what constitutes a reasonable bid price at foreclosure under the statute.
I’ve also noted that the statute shortens the statute of limitations on pursuing post-foreclosure deficiency lawsuits. Specifically, the statute says:
(d)(1) Any action for a deficiency judgment under this section shall be brought not later than the earlier of:
(A) Two (2) years after the date of the trustee’s or foreclosure sale, exclusive of any period of time in which a petition for bankruptcy is pending; or
(B) The time for enforcing the indebtedness as provided for under §§ 28-1-102 and 28-2-111.
So, to collect your debt after a foreclosure, you have to act fast in Tennessee. While two years doesn’t sound like a short time frame, it can be, where the creditor spends time on eviction, selling the property, or even selling the deficiency debt to a third party.
The statute has a September 1, 2010 effective date, so the courts may still be dealing with deficiencies from both the pre-statute and post-statute time periods.
Always be on the look-out for this issue. In the “interesting” case that I mentioned above, the foreclosure occurred in February 2011, with the lawsuit filed in February 2014. In response to this issue, Plaintiff’s counsel confidently cited the general six year statute of limitations on breach of contracts (Tenn. Code Ann. § 28-3-109). The Court rightfully held that the more specific timelines of the foreclosure deficiency statute controlled and dismissed the action.
Who says collection cases aren’t interesting? We made law that day!