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EverBank v. Henson

Court of Appeals of Tennessee, Jackson

January 9, 2015

EVERBANK ET AL.
v.
TOMMY J. HENSON ET AL.

Session October 23, 2014

Appeal from the Chancery Court for Shelby County No. CH110570 Walter L. Evans, Chancellor

T. William A. Caldwell and David B. Herbert, Nashville, Tennessee, for the appellants, EverBank and Mortgage Electronic Registration Systems, Inc.

JoAnn T. Sandifer, pro hac vice, St. Louis, Missouri, for the appellant, Mortgage Electronic Registration Systems, Inc.

Tommy J. Henson and Linda S. Henson, Water Valley, Mississippi, pro se.

Glen G. Reid, Jr., Kathryn K. Van Namen, and Jordan Elliot Reifler, Memphis, Tennessee, for the appellee Bank of Bartlett.

Michael G. Derrick and Phillip C. Bass, Memphis, Tennessee, for the appellee, Wendy Geurin Smith.

Sam Blaiss, Memphis, Tennessee, for the appellees, James K. Winter and Patsy H. Winter.

Frank G. Clement, Jr., P.J., M.S., delivered the opinion of the Court, in which J. Steven Stafford, P.J., W.S., and Arnold B. Goldin, J., joined.

OPINION

FRANK G. CLEMENT, JR., JUDGE

Tommy and Linda Henson owned two parcels of real property in Shelby County, Tennessee. In 1998, the Hensons obtained a $50, 000 loan from the Bank of Bartlett, secured by both parcels of land through a deed of trust which was recorded by the Bank of Bartlett in the Shelby County Register's Office ("Bartlett Deed"). In 2003, the Hensons obtained an additional loan for $162, 000 from Plaza Mortgage Company that was secured by a second-priority deed of trust ("Plaza Deed"). The Plaza Deed identified MERS as the holder of legal title to the security lien, it identified MERS as the beneficiary of the Plaza promissory note acting as "nominee for Lender and Lender's successors and assigns, " and it granted MERS, inter alia, the right to foreclose and sell the property.[1] The Plaza Deed was duly recorded on July 8, 2003, in the Register's Office of Shelby County, Tennessee.

Subsequently, Plaza Mortgage assigned its interest in the Plaza Deed and accompanying promissory note to Flagstar Bank, and, in 2006, Flagstar assigned all of its interests to EverBank. Neither Flagstar nor EverBank recorded their interest in the subject property, relying on the fact that MERS was identified in the duly recorded Plaza Deed as the beneficiary of the Plaza promissory note acting as nominee for "Lender's successors and assigns."

In 2009, the Bank of Bartlett appointed Wendy G. Smith as successor trustee of its first-priority deed of trust and instructed her to conduct a foreclosure sale of the parcels of land pursuant to the Bartlett Deed. In the foreclosure notice, Ms. Smith identified the current owners of record and, under "other interested parties, " she listed only Plaza Mortgage. Notice of the foreclosure sale was published in the local newspaper, The Daily News, on May 7, 14, and 21, of 2009. Written notice of the foreclosure sale was also provided to Plaza Mortgage on May 4, 2009; however, notice was not provided to MERS.

The foreclosure sale took place on May 28, 2009, and the Bank of Bartlett was the successful bidder and purchased both parcels of land for $20, 863.92. The Bank of Bartlett took title to the property under the Trustee's Deed, dated June 1, 2009, and recorded with the Register's Office. On June 26, 2009, James and Patsy Winter purchased one of the two parcels of land for approximately $110, 000. The Bank of Bartlett transferred the parcel via a Special Warranty Deed, which the Winters subsequently recorded.

EverBank did not become aware of the foreclosure sale until September 2009. On April 1, 2011, EverBank and MERS commenced this action against the Hensons, Wendy G. Smith ("the trustee"), the Bank of Bartlett, and the Winters, to set aside the foreclosure sale and recover damages against the trustee.

The trustee filed a motion for summary judgment, arguing that MERS was not entitled to notice of the foreclosure sale because it was not a "party interested" as that term is used in Tenn. Code Ann § 35-5-104(d). The Winters joined in the summary judgment motion and also filed a Tenn. R. Civ. P. 12.02(6) motion to dismiss, arguing that they were bona fide purchasers for value of the property.

The trial court granted the trustee's motion for summary judgment, finding:
[T]he trustee discharged her duties under the statute and Deed of Trust and she had no duty to provide any additional notice to either EverBank or MERS, as those parties failed to record any instrument in the Shelby County Register's Office as required by law to give the substitute trustee notice of the need to notify either EverBank or MERS of the foreclosure sale or include them as interested parties in the published notice. In order to protect their interest, if any, in the property, Everbank and MERS were required to record in the Shelby County Register's Office. Their ...

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