Editor: David Reiss
Brooklyn Law School

March 28, 2013

Tennessee Court of Appeals Dismisses Homeowner Complaint as Unripe

By Gloria Liu

In Mills v. First Horizon Home Loan Corp., No. W-2010-00310-COA-R3-CV, 2010 WL 4629610 (Tenn. Ct. App. Nov. 16, 2010), the court dismissed the homeowners complaint as unripe for declaratory judgment. It did not find that the mortgage would be unenforceable based on the involvement of MERS.

The appeal arose from a complaint to quiet title filed by the homeowners against First Horizon Home Loan Corporation MERS. The homeowners had two mortgages and asserted that, although the second mortgage held by First Horizon on their residence had been satisfied and the deed of trust released, First Horizon had failed to surrender the note as required by Tennessee Code Annotated § 47-3-501(b). Moreover, they were told that the second “note” was destroyed, therefore under Tennessee Code Annotated § 47-3-309, First Horizon had a burden to prove that the second mortgage was enforceable “when the note went missing.” The homeowners also argued that despite language in the deed of trust, MERS cannot be a beneficiary of the first mortgage deed because it never had a right to their mortgage note payments.

The court held that even though the complaint is styled as an action to quiet title, there is no suggestion that the homeowner’s title currently is encumbered other than by a mortgage which they do not deny executing. The second deed of trust securing the second mortgage has been released. The terms of the first mortgage are not in dispute, the mortgage is not in default, and no enforcement proceedings have been initiated against the homeowners. Therefore the action is actually in the nature of a declaratory judgment action that seeks to ascertain whether there is a right to enforce the first mortgage in foreclosure action. The court also found that the real question raised in this action is whether a potential foreclosure action or action to enforce the note upon default would be successful if the original note cannot be produced. Because this was not an enforcement proceeding or foreclosure action, the court found that the issue is not ripe for review where the note is not in default and no foreclosure or enforcement proceedings have been initiated against the homeowners.

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