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Deutsche Bank National Trust Co. v. Lee

Court of Appeals of Tennessee, Nashville

June 13, 2019

DEUTSCHE BANK NATIONAL TRUST COMPANY
v.
STACY LEE ET AL.

          Session June 4, 2019

          Appeal from the Circuit Court for Davidson County No. 17-C-162 Kelvin D. Jones, Judge

         This appeal arises from an action for default on a promissory note. Approximately eight and a half years after the debtors stopped making monthly payments under an installment note, the creditor filed suit for missed monthly payments going back six years from the date of the filing of the complaint, as well as for future installments and the final payment that were to become due under the terms of the note. The debtors asserted that the debt, or some portion thereof, was time-barred. As a result, the debtors raised the statute of limitations as a defense and filed a counterclaim, alleging that the creditor violated the Fair Debt Collection Practices Act and the Tennessee Consumer Protection Act by seeking a judgment on a time-barred debt. The creditor moved for summary judgment on all issues. The trial court granted the motion, concluding that the amounts that the creditor sought are not barred by the statute of limitations and that the undisputed material facts established the creditor's claim against the debtor as a matter of law. This appeal followed. We affirm.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed

          Jason S. Mangrum, Brentwood, Tennessee, for the appellants, Stacy Lee and Janice Lee.

          Robert Thomas Lieber, Jr., Brentwood, Tennessee, for the appellees, Deutsche Bank National Trust Company, Franklin Credit Management Corporation, and Mackie Wolf Zientz & Mann, P.C.

          Frank G. Clement Jr., P.J., M.S., delivered the opinion of the Court, in which D. Michael Swiney, C.J., and Richard H. Dinkins, J., joined.

          OPINION

          FRANK G. CLEMENT, JR., P.J., M.S.

         On January 20, 2006, Stacy and Janice Lee (the "Lees") executed a promissory note (the "Note") in exchange for a loan. Deutsche Bank National Trust Company, as certificate trustee on behalf of Bosco Credit II Trust Series 2010-1 ("Deutsche Bank"), assumed ownership of the underlying debt and became payee under the Note via an allonge.

         The Note, which has a date of maturity of February 1, 2021, requires the Lees to make monthly payments until that date, as well as a final "balloon payment" on that date, to pay off the full amount of the Note's principal and interest. However, the Lees have not made a payment since 2008.[1] The Note sets forth that failure to make a monthly payment constitutes default, and, in the event of default, the holder of the Note may accelerate payment of the Note by demanding that the full amount of the unpaid principal and interest be paid immediately. The Note permits acceleration of payment thirty days after giving notice of default.

         Franklin Credit Management Corporation ("Franklin Credit"), servicer for Deutsche Bank, sent a notice of default letter to the Lees on August 15, 2016. The letter stated that the unpaid principal balance on the Note was $59, 010.66 and that the accrued interest to date was $33, 188.11. The letter also requested that the Lees immediately contact Franklin Credit to make payment on the total outstanding amount of $92, 198.77. The letter expressly indicated that time-barred amounts were not being sought.[2]

         Over three months later, Mackie Wolf Zientz & Mann, P.C. ("Mackie Wolf"), attorneys for Franklin Credit, sent separate letters to the Lees, again giving notice of default, as well as accelerating the balance due under the Note and demanding payment of $92, 198.77.[3] The letters indicated that the total balance owed may increase due to accrued interest and other charges. Although Deutsche Bank would have been entitled to late fees pursuant to the terms of the Note, no demand was made for any late fees.

         Having not received payment from the Lees upon demand, Deutsche Bank initiated this lawsuit on January 20, 2017, asserting claims of breach of contract and unjust enrichment against the Lees. The Lees filed an answer, disputing the amount owed and asserting the six-year statute of limitations as a defense. The Lees also filed a counterclaim against Deutsche Bank, [4] arguing that Deutsche Bank violated the Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. §§ 1692-1692p, and the Tennessee Consumer Protection Act ("TCPA"), Tenn. Code Ann. §§ 47-18-101 to -131, by attempting to collect time-barred debts.

         Deutsche Bank moved for summary judgment on June 12, 2017, arguing that the monthly-installment nature of the Note makes it such that a new cause of action for default on a payment accrues each month that a payment is missed. Accordingly, Deutsche Bank argued that it was entitled to missed monthly payments going back six years from the date Deutsche Bank filed its complaint. Additionally, Deutsche Bank argued that it was entitled to the future monthly payments through the date of maturity and the final balloon payment as permitted by the acceleration clause.[5] Further, Deutsche Bank argued that it did not violate the FDCPA or TCPA by attempting to collect on time-barred debts by seeking a judgment for installments that became due more than six years earlier. Along with its motion, Deutsche Bank filed a statement of undisputed material facts as required by Tenn. R. Civ. P. 56.03. However, Deutsche Bank did not support each fact in its statement by citation to the record, which Tenn. R. Civ. P. 56.03 requires.

         The Lees filed a response to the motion on September 1, 2017; however, the Lees' statement of disputed facts, like that of Deutsche Bank, failed to sufficiently cite to the record. In their response to the motion, the Lees argued that the trial court should deny the motion for failure to comply with Tenn. R. Civ. P. 56.03. The Lees also made alternative arguments as to why Deutsche Bank sought to collect on time-barred debts, which the Lees argued would deny relief to Deutsche Bank based on the statute of limitations and constitute violations of the FDCPA and TCPA. First, the Lees disagreed with Deutsche Bank's theory regarding accrual of causes of action, instead arguing that, because the Lees' last payment was in 2008, the entire debt is time-barred. Second, the Lees argued that, even under Deutsche Bank's theory, Deutsche Bank was seeking at least some amount that is time-barred because Deutsche Bank sought the ...


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