Bradley scored a significant victory in the Tennessee Supreme Court on November 14, 2024. In a long-awaited decision, the Tennessee Supreme Court clarified a long-standing inconsistency in Tennessee law with its opinion in Terry Case v. Wilmington Trust. In addition to ushering in a sea change concerning constitutional standing in the state — a monumental development in and of itself — the high court clarified that Tennessee law does not recognize an independent cause of action for “wrongful foreclosure,” thereby resolving a split of authority that had been bubbling up at the Tennessee Court of Appeals for decades.

There are two main takeaways from the Case decision:

• No More Wrongful Foreclosure Claims: The standalone tort of “wrongful foreclosure” no longer exists under Tennessee law. While borrowers can still challenge foreclosure sales through other tort claims such as fraud, claims for breach of contract, or violations of Tennessee’s non-judicial foreclosure statutes, those causes of action are far clearer than an amorphous “wrongful foreclosure” claim, and, significantly, they all require that a borrower prove damages.
• Tennessee Constitutional Standing: When litigants are seeking to vindicate their private rights in Tennessee state courts, they do not need to show an “injury in fact” to have standing. They need only show an “injury in law.” This makes standing substantially broader in Tennessee state courts than it is in federal courts.

Factual and Procedural Background

After borrowing over half a million dollars as a mortgage loan secured by a deed of trust, Terry Case stopped making payments in 2013. Over the next six years, he filed eight separate bankruptcy petitions to prevent Wilmington Trust, the assignee of the deed of trust, from foreclosing on the property. Wilmington finally obtained court approval to foreclose in 2019 and scheduled a sale for February 2020. Undeterred, Case filed suit in Tennessee state court and obtained a temporary restraining order, halting the impending foreclosure sale. As a result of the order, a representative of the substitute trustee under the deed of trust appeared at the time and place the sale was scheduled to occur and announced that it was postponed. Several days later, the temporary restraining order was dissolved, and the foreclosure sale proceeded as rescheduled.

After the property was sold at auction, Case filed an amended complaint alleging claims for “wrongful foreclosure,” breach of contract, slander of title, and quiet title against Wilmington and the substitute trustee. He alleged that the defendants failed to mail him a notice of the postponed and reschedule sale, which he claimed violated the notice of sale terms of the deed of trust. Notably, the deed of trust was a standard Fannie Mae/Freddie Mac Uniform Instrument, which is very common throughout Tennessee and the rest of the country.

The trial court dismissed Case’s claims for slander of title and to quiet title, and ultimately granted summary judgment in the defendants’ favor on Case’s breach of contract and wrongful foreclosure claims. Case appealed, solely challenging the summary judgment on his wrongful foreclosure claim. The Tennessee Court of Appeals reversed the trial court, concluding that the deed of trust required that Case receive written notice of the postponed and rescheduled sale. Because defendants orally announced the postponement and did not provide written notice, they committed a wrongful foreclosure in the Court of Appeals’ eyes.

No More Wrongful Foreclosure Claims in Tennessee

The Tennessee Supreme Court reversed the Court of Appeals, holding that “there is no common law cause of action for wrongful foreclosure in Tennessee.” In so doing, the Supreme Court overruled a slew of Court of Appeals opinions holding that “wrongful foreclosure” can be asserted “as a primary cause of action when a mortgagor asserts that a foreclosure action is improper under a deed of trust.” This standalone wrongful foreclosure claim did not have any elements and did not require that a borrower prove any damages. As a result, Tennessee borrowers could assert a wrongful foreclosure claim based on a hyper-technical violation of a deed of trust or statutory provision that did not cause them damages, and then seek rescission of a foreclosure sale as their remedy. 

The Tennessee Supreme Court has now put an end to that practice. The Court explained that “wrongful foreclosure” is best understood as “merely a description of the underlying factual basis for the substantive cause of action actually being asserted.” In foreclosure cases, those causes of action would be breach of contract (i.e., a breach of the deed of trust), violations of Tennessee’s non-judicial foreclosure statutes, and, in some cases, fraud. Critically, unlike the now non-existent “wrongful foreclosure” cause of action, each of these causes of action requires that a borrower prove damages to obtain relief.

For Case, the Supreme Court’s decision that there is no cause of action for wrongful foreclosure was fatal. Since he only appealed from the judgment against him on his wrongful foreclosure claim, and “there is no common law cause of action for wrongful foreclosure in Tennessee,” the Court held that “Mr. Case has no remaining claims in this case.”

A Sea Change in Tennessee Standing Law

The Supreme Court also clarified the requirements for standing under the Tennessee Constitution. In City of Memphis v. Hargett, the Tennessee Supreme Court adopted federal standing jurisprudence, which requires that a litigant prove (1) injury in fact, (2) causation, and (3) redressability to have standing to sue. The significance of the “injury in fact” requirement is that a litigant that asserts a bare statutory violation that did not cause them any “concrete harm” does not have standing to sue.

In Case, the Supreme Court clarified that when a litigant is seeking to vindicate their “private rights,” the litigant does not have to show they suffered an “injury in fact” to have standing. The Court held that under the “Open Courts” provision of the Tennessee Constitution, “a person asserting an injury to their land, goods, person, or reputation — i.e., private rights claims — [need only] allege an injury in law in order to have standing in court.” Thus, the violation of a legal right, even if it that violation does not cause any “concrete harm,” is sufficient to confer standing to a litigant seeking to enforce their “private rights” in Tennessee. 

The result is different where a litigant seeks to enforce “public rights” — i.e., where a litigant seeks “judicial review of actions of other branches of government by challenging either statutes, constitutional amendments, or other legislative or executive acts.” Public-rights cases, the Court explained, implicate principles of separation of powers, which “prohibit[ ] the judicial branch from exercising any powers belonging to the executive or legislative branches.” Thus, to have standing in a public-rights case, a litigant must “allege an injury in fact not common to the public.”

Conclusion

The Case decision will have a wide-ranging impact on foreclosure cases throughout Tennessee.  Mortgage servicers now have much clearer guidance for what is required when conducting a non-judicial foreclosure in Tennessee. In other words, servicers no longer need to worry about committing an amorphous “wrongful foreclosure” violation, but instead need only focus on their obligations under deeds of trust, Tennessee’s non-judicial foreclosure statutes, and federal law.

Because the Supreme Court concluded that Tennessee law does not recognize a standalone claim for wrongful foreclosure, however, it did not rule on whether a postponement of a sale must be mailed to a borrower or whether announcing it at the time and place of the originally scheduled sale is enough. This is a significant question left for another day.

The Case Court’s decision on standing may be even more far-reaching. Without a “concrete harm” requirement, litigants that suffer a bare statutory violation that did not cause them injury may have standing to sue in Tennessee state courts. This will almost certainly result in far more cases alleging bare violations of state and federal statutes being filed in Tennessee state courts.