Press "Enter" to skip to content

6th Cir. Holds Mortgagee’s Foreclosure Action Time-Barred Under Tennessee Law

Tennessee mortgage lawThe U.S. Court of Appeals for the Sixth Circuit recently affirmed a trial court’s decision granting summary judgment and dismissing a mortgagee’s foreclosure action as time-barred under Tennessee law, and rejecting the mortgagee’s arguments of oral modification, partial payment, and equitable estoppel, as well as its request for an equitable lien.

A copy of the opinion in Regions Bank v. Fletcher, et al. is available at:  Link to Opinion.

In 1997, a borrower executed a deed of trust and a home equity line of credit agreement (collectively, the “loan”) in the amount of $200,000, in favor of a mortgagee, and secured by real property in Tennessee. The deed of trust was properly recorded, and the terms of the loan provided for monthly interest payments until the maturity date on May 10, 2007. On that date, a final balloon payment of the entire outstanding balance would become due.

The loan contained a provision that stated the mortgagee generally “may not change the terms of this agreement,” with certain exceptions, including that the mortgagee “may make changes that unequivocally benefit” the borrower.

May 2007 passed, the mortgagee took no action, and the borrower continued making monthly interest payments until he passed away in 2009. The borrower’s heirs continued to operate a business at the property and the company’s bookkeeper continued to make payments to the mortgagee. The heirs did not initiate probate proceedings and the mortgagee did not find out about the borrower’s death until 2011. However, the mortgagee continued to accept over $100,000 total in monthly payments from 2011 until 2017.

The mortgagee alleged that the company’s bookkeeper orally modified the maturity date until 2017. The company’s bookkeeper and the heirs disputed this fact. After the disputed 2017 maturity date, the mortgagee initiated foreclosure proceedings. In October of 2018, the mortgagee filed a foreclosure action and requested a declaration that the loan’s maturity date had been extended and that it be granted the right to foreclose. The mortgagee later amended its complaint, adding a request that the court grant the mortgagee an equitable lien against the property.

The heirs moved for summary judgment and the trial court granted their motion holding that the statute of limitations had expired because Tennessee law provides that “liens of mortgages, deeds of trust, and assignments of realty executed to secure debts, shall be barred, and the liens discharged, unless suits to enforce the same be brought within 10 years from the maturity of the debt.” Tenn. Code Ann. § 28- 2-111(a). Thus, the trial court held the statute of limitations expired on May 10, 2017, 10 years beyond the loan’s maturity date because the heirs alleged oral extension of the maturity date was not a duly executed and acknowledged written instrument as required by Tenn. Code Ann. § 28-2-111(c).

In addition, the trial court disagreed that heirs were estopped from raising the statute of limitations as a defense and refused to establish an equitable lien on the property in favor of the mortgagee. Therefore, the trial court granted summary judgment in favor of the heirs. The mortgagee appealed.

On appeal, the Sixth Circuit first determined whether the loan’s maturity date was in May 2007, making the mortgagee’s foreclosure suit untimely under Tennessee law, or whether the loan’s maturity date was extended to April 2017.

The Court of Appeals examined Tenn. Code Ann. § 28-2- 111(a) which states: “[l]iens on realty, equitable or retained in favor of vendor on the face of the deed, also liens of mortgages, deeds of trust, and assignments of realty executed to secure debts, shall be barred, and the liens discharged, unless suits to enforce the same be brought within ten (10) years from the maturity of the debt.” Unless the maturity date was extended, the mortgagee’s foreclosure action would not have been timely because the mortgagee’s foreclosure action was brought more than 10 years after the 2007 maturity date.

As the trial court noted in granting summary judgment, Tenn. Code Ann  § 28-2- 111(c) further provides that liens on realty “may be extended without their priority or legal effectiveness being in any way impaired, for any period of time agreed upon and beyond the ten-year period from the maturity of the obligation or debt” provided that the extension is “evidenced by a written instrument . . . [that is] duly executed and acknowledged,” and “filed for record with the register of the county in which the realty affected is located” and the written instrument must “contain a brief recital of the facts with reference to the original lien and shall provide that the lien shall continue, for a definite period of time in the future” Id.

The mortgagee did not argue that there was a written instrument that extended the maturity date. Instead, it argued that (a) there was an oral modification to the loan or it had the unilateral right to extend the loan; (b) the loan contained a future advances provision that could extend the maturity date for up to 20 years; (c) partial performance — the heir’s continued monthly interest payments — excused any writing requirement; and (d) the heirs are equitably estopped from raising the statute of limitations as a defense or the mortgagee is entitled to an equitable lien.

The Sixth Circuit disagreed with all of these arguments. First, the Court of Appeals rejected the argument that there was an oral modification to the loan because any extension must be in writing to satisfy the Statute of Frauds.

Next, the Court of Appeals also disagreed that the loan contained a future advances provision that could extend the maturity date for up to 20 years. The future advances provisions in the original deed of trust allowed for the borrower to receive additional loans from the mortgagee to be secured by the property, provided that the due date of any new debt “not be more than twenty years after” the original maturity date of May 10, 2007. The Sixth Circuit held that the mortgagee did not adequately address the clause in the deed of trust that provided that “any such commitment must be agreed to in a separate writing.”

Regarding the mortgagee’s argument that the heir’s continued monthly payments constituted partial performance and excused any writing requirement, the Sixth Circuit also disagreed because “payment of principal or interest” will not “toll the statute of limitations placed on deeds of trust” under § 28- 2-111. See Slaughter v. Slaughter, 922 S.W.2d 115, 118 (Tenn. Ct. App. 1995). Although there is Tennessee case law that recognizes partial performance as an exception to the Statute of Frauds, this exception did not apply to real property. See Buice v. Scruggs Equipment Co., 250 S.W.2d 44, 47-48 (Tenn. 1952). Accordingly, the Sixth Circuit agreed with the trial court that the mortgagee could not show as a matter of law that the maturity date of the original loan was extended, its suit is untimely under Tenn. Code Ann. § 28-2-111(a).

Next, the mortgagee argued that the heirs should be equitably estopped from asserting the statute of limitations as a defense based on their inequitable conduct. The mortgagee argued the inequitable conduct of the heirs resulted from the heirs not initiating probate proceedings, not timely informing the mortgagee of the borrower’s death, and for claiming under oath in 2017 there were no outstanding debts on the property.

In Tennessee, a defendant is equitably estopped from asserting the statute of limitations as a defense “when the defendant has misled the plaintiff into failing to file suit within the statutory limitations period.” Redwing v. Cath. Bishop for Diocese of Memphis, 363 S.W.3d 436, 460 (Tenn. 2012). In addition, an equitable estoppel inquiry “is on the defendant’s conduct and the reasonableness of the plaintiff’s reliance on that conduct.’” Id. at 461 (quoting Hardcastle v. Harris, 170 S.W.3d 67, 85 (Tenn. Ct. App. 2004). A plaintiff must also demonstrate that its delay in filing suit was not attributable to its “own lack of diligence.” Id. (quoting Hardcastle, 170 S.W.3d at 85).

The Sixth Circuit noted that although the mortgagee raised numerous issues concerning the heirs’ inequitable conduct, it was still unclear how any of these actions specifically misled the mortgagee into failing to file a timely foreclosure suit. The Court of Appeals went on the further state that any delay was due to the mortgagee’s own lack of diligence and failure to comply with Tennessee law requiring that lien extensions and contracts involving interests in real property be in writing. As a result, the mortgagee did not show that the heirs misled it into failing to file a suit before the limitations period had run.

Lastly, the Sixth Circuit examined whether the trial court erred in refusing to impose an equitable lien on the property. Under Tennessee Law, in order to create an equitable lien, there must be “proof (1) that the parties intended to make the particular property a security for the obligation, (2) that valuable consideration passed between the parties, and (3) there is an equitable reason for imposing the lien.” Ewing v. Smith, No. 85-294-II, 1986 WL 2582, at *5 (Tenn. Ct. App. Feb. 26, 1986).

Again, the mortgagee argued that the evidence established that the loan’s maturity date had been extended to April 11, 2017, and that equity requires a finding that the 10-year period for enforcement did not begin to run until that date. However, the Sixth Circuit disagreed because based on the facts in the record it found there was no equitable reason to impose a lien.

Accordingly, the trial court’s decision granting summary judgment in favor of the heirs was affirmed.

Photo: 4kclips/

Print Friendly, PDF & Email

Jake VanAusdall is Senior Counsel in the Nashville office of Maurice Wutscher LLP. He practices in the firm’s Consumer Credit Litigation and Commercial Litigation groups predominantly representing financial institutions. Jake also has substantial litigation experience representing clients involved in intellectual property, construction, contract, and business disputes. Jake has been recognized as a “Mid-South Super Lawyers – Rising Star” in the area of Business Litigation (2018-2022), and is a former member of the Tennessee John Marshall American Inn of Court. For more information, see

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.