CitiFinancial Mortgage Company, Inc. v. Augustus Beasley ( 2007 )

IN THE COURT OF APPEALS OF TENNESSEE
AT JACKSON
October 26, 2006 Session
CITIFINANCIAL MORTGAGE COMPANY, INC. v. AUGUSTUS
BEASLEY, ET AL.
Direct Appeal from the Circuit Court for Tipton County
No. 6086 Joe H. Walker, III, Judge
No. W2006-00386-COA-R3-CV - Filed January 11, 2007
Appellants Augustus and Sheila Beasley (the Beasleys) seek to challenge the denial of their request
to appeal an adverse unlawful detainer judgment to circuit court and to set aside the foreclosure of
their residence. Specifically, the Beasleys appeal the trial court’s grant of summary judgment to
CitiFinancial Mortgage, Inc. (Citi) and denial of their petition for writs of certiorari and supersedeas,
filed after the deadline for appealing the judgment as of right. The court denied the petition on the
grounds that it did not set forth sufficient merits for removal to circuit court for a trial de novo. In
the petition for writs of certiorari and supersedeas, the Beasleys advanced as grounds for review the
insufficiency of funds for filing a timely appeal and premature foreclosure on their residence in
violation of the deed of trust. On appeal, they contend these allegations constituted sufficient merits
as required by Tennessee Code Annotated Section 29-18-129. We reverse and remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Reversed; and
Remanded
DAVID R. FARMER , J., delivered the opinion of the court, in which W. FRANK CRAWFORD , P.J., W.S.,
and ALAN E. HIGHERS, J., joined.
Sheila L. Robinson-Beasley, Memphis, Tennessee, for the appellants, Augustus Beasley and Sheila
Robinson-Beasley.
Jason S. Mangrum and Katherine Kellogg Kuhn, Nashville, Tennessee, for the appellee,
CitiFinancial Mortgage Company, Inc.
OPINION
The Appellants, Augustus and Sheila Beasley (Mr. Beasley, Ms. Beasley, or the Beasleys),
defaulted on a loan secured by their residence and received notice of default from CitiFinancial
Mortgage Company, Inc. (Citi), holder of the deed of trust and loan, by facsimile dated July 29,
2004. The facsimile correspondence, “per requested,” included the amount required to cure the
default and indicated that the reinstatement figures would be “good to [August 12, 2004].” The
Beasleys did not cure the default, and the foreclosure sale occurred on August 13, 2004, at the Shelby
County courthouse. Citi purchased the residence for $248,606.73.
The Beasleys refused to vacate the residence. Citi obtained a detainer warrant on August 24,
2004, which was posted at the Beasleys’ residence on the third attempt at service. A copy was then
mailed to the Beasleys.
At the General Sessions detainer hearing on September 27, 2004, Citi obtained a judgment
for possession. The Beasleys concede in their memorandum opposing summary judgment that they
did not appear at the detainer hearing. Nor did they appeal the General Sessions judgment. Instead,
slightly less than a month later, they filed a petition for writs of certiorari and supersedeas pursuant
to Tennessee Code Annotated Section 29-18-1291 on October 21, 2004, in Shelby County Circuit
Court. In the petition, the Beasleys alleged that they did not have the funds available to post the
bond for a timely appeal and that they were unaware of Citi’s intent to repossess the home until
October 20, 2004, the evening before filing their petition.
In January 2005, Citi filed a motion for summary judgment in response to the Beasleys’
petition and appended a Statement of Material Facts Not in Dispute. In the statement, Citi recited
the relevant facts supporting the judgment in the detainer action, yet omitted the relevant facts, if
any, pertaining to the Beasleys’ petition. Nowhere in its filings does Citi mention the date of notice
of default. On February 25, 2005, a hearing on the matter occurred in Shelby County Circuit Court
before Judge Rita Stotts, who announced that she would recuse herself in the matter. The same day,
the Beasleys filed a motion for leave to amend the original petition, a proposed amended petition
setting forth the facts pertinent to the wrongful foreclosure allegation, a statement of material facts
in dispute, and a “Responsive Opposition to Plaintiff’s Motion for Summary Judgment.”
On August 8, 2005, upon motion by Citi and by agreement of the parties, venue for the
hearing changed to Tipton County. The Tipton County Circuit Court conducted the summary
judgment hearing on January 12, 2006. The Statement of Evidence or Proceedings filed by the
Beasleys indicates that they argued the issue of wrongful foreclosure before the court on January 12,
2006. The record also reveals that the Beasleys re-filed all previous filings, including the proposed
amended petition, in Tipton County on the next day, even though the transfer of venue occurred after
1
Tennessee Code Annotated Section 29-18-129 provides that
[t]he proceedings in such action may, within thirty (30) days after the rendition of judgment, be
removed to the circuit court by writs of certiorari and supersedeas, which it shall be the duty of the
judge to grant, upon petition, if merits are sufficiently set forth, and to require from the applicant a
bond, with security sufficient to cover all costs and damages; and, if the defendant below be the
applicant, then the bond and security shall be of sufficient amount to cover, besides costs and damages,
the value of the rent of the premises during the litigation.
Tenn. Code Ann. § 29-18-129 (2000).
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the filings had been submitted to the court in Shelby County. They also provided, “as promised,”
a Memorandum of Law with attachments, another copy of the proposed amended petition, and case
law in support of their argument, directly to the judge by letter dated January 12, 2006. In its order
of January 26, 2006, the court found that the Beasleys had not stated sufficient merits in the petition
and accordingly granted summary judgment to Citi. The order referenced the fact of foreclosure, the
detainer action, the Beasleys’ refusal to vacate, the filing of the petition, and the insufficient
allegations therein. Although based “upon the entire record,” the order did not reference the
amended petition or the Beasleys’ motion for leave to amend the petition.
On appeal, the Beasleys restate their contentions of insufficient funds for a timely appeal and
of wrongful foreclosure. The Beasleys contend that, had Citi adhered to the terms of the deed of
trust by exercising the power of sale no sooner than thirty (30) days after tendering notice of default,
they could have cured the default and reinstated the loan.
Issues Presented and Standard of Review
On appeal, the Beasleys raise the issue, as we perceive it, of whether the trial court erred in
dismissing their petition for writs of certiorari and supersedeas on the grounds of insufficient merits.
Citi, on the other hand, restates the issue as whether the trial court erred in granting Citi’s motion
for summary judgment. Because the trial court granted summary judgment in the absence of
disputed material facts, the parties on appeal present only questions of law. We review questions
of pure law de novo with no presumption of correctness for the ruling of the trial court below. Inmon
v. Hadley, 2006 WL 2507188, at *5 (Tenn. Ct. App. 2006) (citing Campbell v. Fla. Steel Corp., 919
S.W.2d 26, 35 (Tenn. 1996)).
The resolution of this case requires us to answer three questions: first, whether the trial court
properly considered the Beasleys’ amended petition; second, what a petitioner for writs of certiorari
and supersedeas must show to obtain review of an unlawful detainer judgment; and third, whether
wrongful foreclosure is a meritorious defense to an unlawful detainer action.
Whether the Trial Court Properly Considered the Amended Petition
We now address the threshold issue of whether the trial court properly considered the
Beasleys’ amended petition. Resolution of this issue proves determinative because the original
petition lacked sufficient merits2 to support a trial de novo, whereas the amendment added wrongful
foreclosure, a potentially meritorious defense. We conclude, on procedural grounds, that the
amended petition was properly before the trial court.
2
The only allegation in the original petition that might satisfy the sufficient merit requirement is lack of notice
of Citi’s intent to repossess the property. The language of the petition leaves open the question of whether the Beasleys
alleged lack of notice of the detainer hearing or of Citi’s imminent execution of the writ of possession. Vague and
indefinite allegations cannot sustain a petition for writs of certiorari and supersedeas following forcible entry and detainer
actions. Pritchard v. Dixie Greyhound Lines, 192 S.W .2d 845, 847 (Tenn. 1946). W e find the Beasleys’ allegation of
lack of notice to be equivocal at best and insufficient to satisfy the requirement.
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The Tennessee Rules of Civil Procedure govern appeals taken from general sessions courts
to circuit courts. Tenn. R. Civ. P. 1. According to the Rules, filings addressing the court may take
one of two forms: pleadings or motions. See Tenn. R. Civ. P. 7. A pleading that sets forth a claim
for relief must include a “short and plain statement of the claim showing the pleader is entitled to
relief” and a demand for relief. Tenn. R. Civ. P. 8.01. The Rules limit the types of pleadings
allowed and distinguish them from motions. See Tenn. R. Civ. P. 7 (limiting pleadings to the
complaint, answer, reply to counterclaim, answer to cross-claim, third-party complaint, and third-
party answer, and treating motions and other papers in a separate rule). A motion, on the other hand,
is “an application to the court for an order” that must be in writing (unless made during a hearing or
trial), state its grounds with sufficient particularity, and identify the relief or order requested. Tenn.
R. Civ. P. 7.02.
As contemplated by the Tennessee Rules of Civil Procedure, a motion is not a pleading.
Robert Banks, Jr. & June F. Entman, Tennessee Civil Procedure § 5.1(a), at 5-7 (2d ed. 2004) (“Rule
7 provides separate treatment for pleadings and for motions and other papers . . . it is important not
to read the term ‘pleading’ as encompassing a motion.”); id.§ 5.1(e), at 5-11 (“Rule 7.02(1) requires
that any application to the court should be in the form of a motion. Technically, therefore, neither
letters to the court, ‘petitions,’ nor other forms of requests other than by motion are proper.”).
Although reasonable persons might differ as to whether this type of petition is a motion or a
pleading, we need not make this esoteric distinction here. The petition, whether treated as a
pleading or a motion, should have been amended.
No provision in the Tennessee Rules of Civil Procedure addresses the amendment of
motions. Banks & Entman, supra, § 5.1(e), at 5-14. In general, Tennessee courts will allow for a
motion’s amendment so long as there has been no ruling on the original motion. Id. at 5-15. In this
case, the court had obviously not ruled on the petition (construed as the original motion). Moreover,
the record on appeal reveals that the proposed amendment was in the possession of Citi for almost
one year before the hearing, was filed with the Shelby County Circuit Court Clerk prior to the
transfer of venue, and was argued at the hearing.3 Indeed, the Beasleys’ statement of evidence
indicates that the court heard argument on and considered the issues pertaining to foreclosure, yet,
as apparent from the ruling, found them unpersuasive. Nothing in the record suggests that Citi ever
objected to or contested the contents of the Beasleys’ statement of evidence, so we accept it as an
accurate account of the proceedings in the trial court. Accordingly, considered as a motion, the
amended petition was properly before the trial court.
Likewise, an analysis of the petition as a pleading yields the same result. Although the
Beasleys moved for leave to amend the petition, they could have amended it as of right in any event
3
Although the Tennessee Rules of Civil Procedure do not address the amendment of motions, they do contain
safeguards for the benefit of non-movants. For example, the particularity and writing requirements for motions serve
to notify the adverse party of the pendency of and grounds for the motion. Banks & Entman, supra, at 5-11, 5-13. The
facts of this case provide further support for amendment because Citi was on notice of the motion and its contents well
before the hearing. Thus, amending the motion/petition would not violate the safeguarding of fairness through notice
as provided by the Rules.
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because Citi never filed an answer. Tennessee Rule of Civil Procedure 15.01 provides that “[a] party
may amend the party’s pleadings once as a matter of course at any time before a responsive pleading
is served.” Tenn. R. Civ. P. 15.01. If the pleading at issue is the type to which no response is
permitted, then the rules provide a fifteen (15) day window for amendment as of right, so long as
no trial date has been set. See Tenn. R. Civ. P. 15.01. Nothing in the Rules forbids an answer in
response to a petition for writs of certiorari and supersedeas in this circumstance.
The record indicates that Citi filed a motion for summary judgment but never filed an answer.
Thus, because a motion is not a pleading, Citi never filed a responsive pleading so as to foreclose
the Beasleys’ opportunity to amend the petition as of right.4 As proponents of a complaint under the
Rules, the Beasleys could have amended the petition as of right in any event. Either procedural
approach arrives at the same conclusion that the petition was, for all intents and purposes, properly
amended.
The Required Showing for Sustaining a Petition for Writs of Certiorari and Supersedeas
Following an Unlawful Detainer Action
The parties in this appeal dispute the standard for prevailing on a petition for writs of
certiorari and supersedeas. The Beasleys cite various standards yet fail to identify which one applies
to their case. They argue that the problem of insufficient funds sufficiently explains a petitioner’s
reason for not appealing; that a petition need not state merits or an excuse for failing to appeal; and
that allegations constituting a meritorious defense satisfy the sufficient merits requirement. Citi, on
the other hand, contends that a petitioner must show a substantial reason for not appealing as well
as allegations that, if true, would constitute a meritorious defense. The proper standard under
Tennessee law lies in the middle of this spectrum.
An unsuccessful defendant in a forcible entry and detainer (FED) action has ten (10) days
following the general sessions judgment to file for appellate review in circuit court. Tenn. Code Ann.
§ 29-18-128 (2000). Although the defendant can appeal as of right, the plaintiff5 may regain
possession of the premises by posting bond for twice the amount of one year’s rent. Tenn. Code
4
W e note that the “appropriate pre-answer procedure for testing the legal sufficiency of a complaint” is filing
a motion to dismiss for failure to state a claim. Banks & Entman, supra § 5.6(g), at 5-109. Moreover, whether a party
files a motion to dismiss or a motion for summary judgment, it still must comply with the particularity requirements set
forth in Rule 7 of the Tennessee Rules of Civil Procedure. In its motion for summary judgment, Citi identifies no
grounds in support of its motion and instead conclusively asserts that it is entitled to judgment as a matter of law. In its
statement of facts not in dispute, it does, however, enumerate the underlying facts of the foreclosure and detainer action.
Taken together, these filings seem to place the merits of the detainer action back into question, rather than to challenge
the sufficiency of the Beasleys’ petition. Nevertheless, because the gravamen of this action is whether the Beasleys can
retry the detainer action, we will proceed by considering the sole question of whether the Beasleys stated sufficient merits
in their petition.
5
Section 29-18-130(b)(2) alters these requirements in cases where the landlord brings an FED action in response
to the lessee’s failure to pay rent. See Tenn. Code Ann. § 29-18-130 (b)(2) (2000).
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Ann. § 29-18-130 (b)(1) (2000). Alternatively,6 if the unsuccessful defendant desires to retain
possession of the property throughout the litigation, he or she may petition the court for writs of
certiorari and supersedeas, which, if issued, will stay the writ of possession and allow for review in
circuit court. Nashville Hous. Auth. v. Kinnard, 207 S.W.2d 1019, 1020 (1949); see Tenn. Code
Ann. § 29-18-129 (2000). To succeed in a petition for writs of certiorari and supersedeas, the
defendant/petitioner must file within thirty (30) days following the judgment, sufficiently set forth
merits, and post bond to cover costs, damages, and the value of the rent during litigation. Tenn. Code
Ann. § 29-18-129 (2000). When the petitioner meets these more stringent standards, the court must
issue the writs. Id.
The requirements for sustaining a petition for writs of certiorari and supersedeas following
FED actions differ from those following other cases. Elliott v. Lawless, 53 Tenn. 123 (Tenn. 1871).
The general standard requires the petitioner to show good reason for not taking an appeal, whereas
the standard applicable in cases of FED judgments7 does not. Elliott, 53 Tenn. at 126. Both
standards, however, require a showing of sufficient merits. Id. Thus, when an unsuccessful FED
defendant posts bond and files for writs of certiorari and supersedeas within thirty days of the
judgment, he or she need only state sufficient merits in the petition to obtain review in circuit court.
See Ammons v. Coker, 139 S.W. 732, 733 (Tenn. 1911); Rogers v. Wheaton, 13 S.W. 689, 689
(Tenn. 1890); Elliott, 53 Tenn. at 126.
Merits sufficient to sustain a petition for writs of certiorari and supersedeas are allegations
which, if true, would constitute a meritorious defense. S. Servs., Inc. v. Brewington, No. 86-42-II,
1986 WL 6062, at *3 (Tenn. Ct. App. May 29, 1986); Investors Diversified Prop. Mgmt., Inc. v.
6
Although certiorari and supersedeas offer an alternative to the unsuccessful FED defendant, we emphasize that
the remedy by this alternative is different from, but not a substitute for, the remedy by appeal. The authorities
unequivocally state that, in FED actions, certiorari is not a substitute for appeal. See, e.g., Ammons v. Coker, 139 S.W .
732, 733 (Tenn. 1911)(noting that the petitioner could have obtained the same remedy by certiorari as by appeal only
by showing good reason for failing to appeal; opining that she could have obtained a different remedy by using the
certiorari and supersedeas together as provided by the statutes; and holding that the petitioner could not use certiorari
alone as a substitute for appeal). Instead, when coupled with the writ of supersedeas, certiorari provides an alternative
remedy distinct from that offered by the appeal as of right. Bell v. Smith, 202 S.W .2d 654, 656 (Tenn. 1947); Ammons,
139 S.W. at 733 (“[I]f the defendant desires to retain possession . . . , he has his remedy by certiorari and supersedeas.
If he is willing to surrender possession pending the litigation . . . , he has his remedy by appeal.); Robertson v. Penn.
Mut. Life Ins. Co., 123 S.W .2d 848, 850 (Tenn. Ct. App. 1938) (noting that Tennessee statutes provide “two alternative
remedies,” one of which is “by appeal, and the other . . . by certiorari and supersedeas”). Certiorari and supersedeas
allow the defendant to retain possession of the property, whereas appeal leaves the defendant vulnerable to the writ of
possession. Although a petitioner for writs of certiorari and supersedeas enjoys more time to file than does an appellant,
he or she must post bond sufficient to cover the costs of appeal, damages, and rent during litigation, as well as bear the
risk of the petition’s denial. See Tenn. Code Ann. § 29-18-129 (2000).
7
Certain circumstances will require the FED petitioner to show good cause for not taking an appeal. First, if
the petitioner files after the expiration of the statutory thirty (30) day period, he or she must make the more demanding
showing required under the general standard. Rogers, 13 S.W. at 689. Similarly, if the petitioner files only for a writ
of certiorari without also petitioning for a writ of supersedeas, he or she must meet the higher standard by justifying the
failure to appeal. Ammons, 139 S.W . at 733.
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Wright, 1985 Tenn. App. LEXIS, at *11–*12 (Tenn. Ct. App. 1985); see Elliott v. Lawless, 53 Tenn.
at 126–27. The language of the statute does not require the petitioner to prove the allegations by a
preponderance of the evidence or to the level of detail expected at trial. S. Servs., 1986 WL 6062,
at *3. Rather, the petitioner’s prima facie showing of merit will suffice for the issuance of the writs.
Id.
The Beasleys complied with the statutory requirements of posting bond and filing for writs
of certiorari and supersedeas within thirty (30) days of the unlawful detainer judgment. As
petitioners who complied with the statute in seeking de novo review in circuit court, the Beasleys
must have made a prima facie showing of merit in their petition to retry the detainer action. We
now address whether, in the Beasleys’ case, the allegation of wrongful foreclosure constitutes a
meritorious defense to the unlawful detainer action. If it does, then the Beasleys are entitled to their
writs.
Whether Wrongful Foreclosure is a Valid Defense to an Unlawful Detainer Action
Since 1821, Tennessee has recognized “a right to bring a cause of action for a writ of
possession when a lessee remains on the leased property after the lease has been terminated.” Cain
P'ship v. Pioneer Inv. Servs. Co., 914 S.W.2d 452, 456 (Tenn.1996). Section 29-18-101 of the
Tennessee Code provides that “[n]o person shall enter upon any lands, tenements, or other
possessions, and detain or hold the same, but where entry is given by law, and then only in a
peaceable manner.” Tenn. Code Ann. § 29-18-101 (2000). The legislative intent behind the creation
of FED actions was to provide a streamlined, inexpensive, summary procedure to determine the
rights to possession of land, in contrast to the old formal common law ejectment action. Newport
Hous. Auth. v. Ballard, 839 S.W.2d 86, 89 (Tenn. 1992). FED proceedings also serve the function
of preventing violence and breaches of the peace that result from the inherent friction caused by
repossessing property through self-help. Childress v. Black, 17 Tenn. 317, 320 (1836); 35A
Am.Jur.2d Forcible Entry and Detainer § 6 (2006). To avoid these conflicts, the party seeking to
repossess the land must do so with the aid of a writ of possession issued by the court. Hayes v.
Schweikart's Upholstering Co., 402 S.W.2d 472, 484 (1965).
In contrast to suits in ejectment, which resolve issues of title and the resulting right to
possession, FED actions concern only the right to possession. Newport Hous. Auth., 839 S.W.2d
at 89. In these summary proceedings, “the estate, or merits of the title, shall not be inquired into.”
Tenn. Code Ann. § 29-18-119(c) (2000). At first glance, it would seem that wrongful foreclosure,
being tantamount to an assertion of title, could not constitute a defense in this action. Where title
bears directly upon the right of possession, however, a party may legitimately interpose the issue.
Allison v. Casey, 63 Tenn. 587 (Tenn. 1874) (allowing evidence of title as proof of right to control
and rent out property); Phillips v. Sampson, 39 Tenn. 429 (Tenn. 1859); Settle v. Settle, 29 Tenn. 504(Tenn. 1850). For example, a court may inquire into title when a claimant has fraudulently
represented his title to another and induced him to lease the property. Phillips, 39 Tenn. at 429.
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Additionally, FED actions cannot be resolved in favor of a claimant when title, if bearing
directly on his immediate right to possession, is questionable. See Elliott v. Lawless, 53 Tenn. 123(Tenn. 1871); 35A Am.Jur.2d Forcible Entry & Detainer § 50 (2006) (“[I]f the issue of title is
germane to the issue of who has the present right of possession, questions of title may be raised . .
. . However, such an issue may result in the case being removed from the summary proceedings
contemplated by a forcible entry and detainer action, or the claimant may be required to establish his
or her superior title prior to bringing the summary proceeding.” (footnotes omitted)). In Elliott v.
Lawless, the plaintiff in a detainer action appealed an adverse judgment following a retrial of the
summary proceeding below. Id. at 124–25. He specifically appealed the denial of his motion to
dismiss the defendant’s petition for certiorari and supersedeas, as well as the judgment entered for
defendant after the retrial. Id. The Tennessee Supreme Court held that the trial court properly
denied the plaintiff’s motion to dismiss the petition because the defendant had stated sufficient
merits; moreover, there was no evidence that the defendant had forcibly taken possession of the
property from the plaintiff or that he unlawfully detained it. Id. at 129–30. Rather, the proof tended
to show that the defendant had either taken possession from one who claimed title through adverse
possession or had entered when no other person was in actual possession of the property. Id. at 130.
Because forcible entry and detainer actions do not resolve issues of title, the plaintiff had apparently
sued for possession under the wrong theory. Id. at 129. Assuming the defendant took possession
of vacant property or from a third party claiming title through adverse possession, the Tennessee
Supreme Court noted that the plaintiff should have brought a suit in ejectment to attempt to regain
possession. Id. The distinguishing feature between ejectment and unlawful detainer is the
appearance of an issue regarding legal title of the plaintiff. Metro. Life Ins. Co. v. Moore, 72 S.W.2d
1050, 1051 (1934).
Here, we consider a detainer action brought against the maker of a deed of trust who, after
default and foreclosure, refused to surrender possession of the property. Under these facts, one
seeking to regain possession by way of the summary FED proceeding must rely on the action of
unlawful detainer.8 Unlawful detainer occurs “where the defendant enters by contract, either as
tenant or as assignee of a tenant, . . . willfully and without force, holds over the possession from the
landlord, or the assignee of the remainder or reversion.” Tenn. Code Ann. § 29-18-104 (2000).
Thus, a landlord/tenant relationship, established by contract, is the baseline requirement for
maintaining an unlawful detainer action. If the trust deed establishes a landlord/tenant relationship
between the mortgagor and foreclosure sale purchaser, then a constructive entry on the part of the
purchaser attaches upon the passing of title; this constructive entry provides the basis for maintaining
the unlawful detainer action. Metro. Life Ins. Co., 72 S.W.2d at 1051; Griffith v. Brackman, 37 S.W.
273, 274 (1896). Under the facts of this unlawful detainer action, the right to immediate possession
requires (1) the plaintiff’s (constructive) possession and (2) the plaintiff’s subsequent loss of
8
Although FED proceedings are considered one type of action, the Tennessee Code identifies separate bases
for the recovery of real property by summary proceeding: forcible entry and detainer, Tenn. Code Ann. § 29-18-102
(2000), forcible detainer, Tenn. Code Ann. § 29-18-103 (2000), and unlawful detainer, Tenn. Code Ann. § 29-18-104
(2000).
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possession by the defendant’s act of unlawful detainer. Accord Foster v. Hill, 510 S.W.2d 520, 522
(Tenn. Ct. App. 1973).
Even though the right to immediate possession does not generally hinge on title to the
property, in the unique case of foreclosures conducted under a power of sale, however, the
landlord/tenant relationship may not arise when the trustee has exercised the power of sale in
violation of the deed of trust. If, according to the Beasleys’ allegations, Citi’s wrongful foreclosure
resulted in the passage of void title and failed to place it in constructive possession of the property,
then it could not maintain an unlawful detainer action. It follows that the Beasleys would have stated
a meritorious defense and should have secured writs of certiorari and supersedeas.
We first consult the terms of the deed of trust to determine the effect of the trustee’s timing
of foreclosure. The deed of trust executed by the Beasleys provides, in pertinent part, as follows:
21. Acceleration; Remedies. Lender shall give notice to Borrower prior to
acceleration following Borrower’s breach of any covenant or agreement in this
security instrument but not prior to acceleration under paragraph 17 (unless
applicable law provides otherwise). The notice shall specify: (a) the default; (b) the
action required to cure the default; (c) a date, not less than 30 days from the date the
notice is given to Borrower, by which the default must be cured; and (d) that failure
to cure the default on or before the date specified in the notice may result in
acceleration of the sums secured by this Security Instrument and sale of the Property.
The notice shall further inform Borrower of the right to reinstate after acceleration
and the right to bring a court action to assert the non-existence of a default or any
other defense of Borrower to acceleration and sale. If the default is not cured on or
before the date specified in the notice, Lender at its option may require immediate
payment in full of all sums secured by this Security Instrument without further
demand and may invoke the power of sale and any other remedies permitted by
applicable law. Lender shall be entitled to collect all expenses incurred in pursuing
the remedies provided in this paragraph 21 including, but not limited to, reasonable
attorneys’ fees and costs of title evidence.
If Lender invokes the power of sale, Trustee shall give notice of sale by public
advertisement in the county in which the Property is located for the time and in the
manner provided by applicable law, and Lender or Trustee shall mail a copy of the
notice of sale to Borrower in the manner provided in paragraph 14. Trustee, without
demand on Borrower, shall sell the Property at public auction to the highest bidder
at the time and under the terms designated in the notice of sale. Lender or its
designee may purchase the Property at any sale.
Trustee shall deliver to the purchaser Trustee’s deed conveying the Property
without any covenant or warranty expressed or implied . . . . If the Property is sold
pursuant to this paragraph 21, Borrower, or any person holding possession of the
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Property through Borrower, shall immediately surrender possession of the Property
to the purchaser at the sale. If possession is not surrendered, Borrower or such
person shall be a tenant at will of the purchaser and hereby agrees to pay the
purchaser the reasonable rental value of the Property after sale.
Since the original filing of their amended petition in February of 2005, the Beasleys have asserted
that they received “notice” of default and acceleration on July 29, 2004. The facsimile is the only
evidence of notice submitted by the Beasleys, and Citi has neither disputed the characterization of
the facsimile as the “notice” required under these terms, nor has it provided documentation to show
other correspondence between the parties. For the purposes of evaluating the Beasleys’ petition,
then, we consider the facsimile to support the Beasleys’ prima facie case of wrongful foreclosure.
It appears on its face that the undisputed date of the foreclosure sale was within the thirty (30) day
curative period and that the sale violated the terms of the trust deed. Whether or not the facsimile
was in fact the only “notice” provided by Citi under the terms of the contract and whether Citi in fact
foreclosed in violation of the trust deed, however, are matters for trial.
In general, Tennessee law has required the trustee’s strict compliance with the advertisement
and notice terms as provided in the deed of trust. See, e.g., Henderson v. Galloway, 27 Tenn. 692,
695–96 (Tenn. 1848). The consequences of a foreclosing trustee’s failure to comply with foreclosure
terms depend upon the source of the requirement. Specifically, if the terms are sufficiently clear and
originate in the deed of trust, the law demands strict compliance for the conveyance to be valid.
Progressive Bldg. & Loan Ass’n v. McIntyre, 89 S.W.2d 336, 336 (Tenn. 1936). In contrast, where
a foreclosing trustee proceeds according to statutory requirements, the law in Tennessee is not so
exacting. See Tenn. Code Ann. §§ 35-5-101–35-5-116 (2001 & Supp. 2006) (addressing non-judicial
sales pertaining to the foreclosure of deeds of trust). The failure of a trustee to comply with statutory
requirements does not render the sale at foreclosure void or even voidable. See Tenn. Code Ann.
§ 35-5-106 (2001 & Supp. 2006) (sale without advertisement is not void); Doty v. Fed. Land Bank
of Louisville, 89 S.W.2d 337 (Tenn. 1936); Williams v. Williams, 156 S.W.2d 363, 369 (Tenn. Ct.
App. 1941).
But the parties can vary the terms of foreclosure by contract, and where a deed of trust
provision varies from the statutory requirements, that term will generally supersede the statutory
requirement. See Tenn. Code Ann. § 35-5-101(d) (2001 & Supp. 2006)(“Nothing in this section
shall be construed as applying to any notice published in accordance with any contract entered into
heretofore, and expressed in a mortgage, deed of trust or other legal instruments.”); McIntyre, 89
S.W.2d at 336 (holding a foreclosure sale to be void, and purchaser’s title invalid, where trustee sold
property after twenty-two days of advertisement, rather than the twenty-eight days required by the
deed of trust); Potts v. Coffman, 240 S.W. 783, 784 (Tenn. 1922). If the trustee breaches the
controlling terms, the foreclosure sale may be set aside. McIntyre, 89 S.W.2d at 337; In re: Kitts,
274 B.R. 491, 494 (Bankr. E.D. Tenn. 2002) (setting aside a foreclosure sale in light of the trustee’s
violation of the deed of trust default notice provisions). When the purchaser at the foreclosure sale
has drafted the deed of trust controlling the sale, and where the deed of trust waives and conveys the
makers’ equity of redemption for the benefit of the purchaser, the instrument “must be strictly
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construed, and the terms thereof must be followed strictly by the trustee, in order to deprive the
makers of their title by means of a sale thereunder.” McIntyre, 89 S.W.2d at 336. For example, a
trustee must comply with terms such as notice of time and place of sale, as well as personal notice
of sale, if provided for in the deed of trust.
When, by the terms of the deed, the trustee is required before making sale to give
notice to the bargainor of the time and place of sale, the giving of such notice is in
the nature of a condition precedent, and, if not complied with, the sale is
unauthorized and void and will communicate no title to the purchaser. And if the
requirement be that personal notice shall be given, the trustee cannot substitute notice
by advertisement in a newspaper, or at some public place or places, because not
within the scope of his authority and also because such a departure on the part of the
trustee might be made to defeat the very object of the requirement by enabling him
to sell the property without the knowledge of the party making the deed.
Henderson v. Galloway, 27 Tenn.692, 695–96 (Tenn. 1848).
According to the terms of the deed of trust executed by the Beasleys, the Lender may invoke
the power of sale only after the expiration of the thirty (30) day period. Moreover, only when the
sale occurs “pursuant to . . . paragraph 21” and the Borrower refuses to surrender possession does
a landlord/tenant relationship arise between the Borrower and purchaser. Assuming the Beasleys’
allegations to be true and construing these terms strictly, we believe the Beasleys have stated a valid
defense because Citi would have lacked authority to sell the property at foreclosure. This type of
contract breach would be sufficient to prevent the passage of good title and, thus, the emergence of
the landlord/tenant relationship. In the absence of this relationship, Citi would not have been in
constructive possession of the property so as to maintain an unlawful detainer action.
Conclusion
In this case, the Beasleys seek to retry the unlawful detainer action in circuit court by way of
writs of certiorari and supersedeas. To prevail in petitioning for the writs, the Beasleys must have
set forth sufficient merits, or a prima facie, meritorious defense. We hold that the Beasleys are
entitled to writs of certiorari and supersedeas because, in addition to complying with the statutory
bond and timeliness requirements, they stated a prima facie case of wrongful foreclosure, which, in
this particular circumstance, is a valid defense. An allegation of wrongful foreclosure constitutes
merits sufficient to sustain a petition for review pursuant to Tennessee Code Annotated Section 29-
18-129 where the trustee has conducted the foreclosure sale before expiration of the curative period
clearly set forth in the deed of trust; where the contractual curative period supersedes the statutory
requirements for non-judicial foreclosure sales; where the terms of the deed of trust give rise to the
power of sale only after the expiration of the curative period; where the breach of this term would
invalidate the conveyance at the foreclosure sale; and, therefore, where the purchaser would acquire
no title and could not establish the right to immediate possession of the premises in an unlawful
detainer action.
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For the foregoing reasons, we reverse the judgment of the trial court below and remand for
the issuance of writs of certiorari and supersedeas and for further proceedings consistent with this
opinion. The costs of this appeal are taxed to CitiFinancial Mortgage Company, Inc., for which
execution may issue if necessary.
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DAVID R. FARMER, JUDGE
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