One Domino Falls: Tennessee Supreme Court Reshapes Foreclosure Claims

With its long-awaited opinion in Terry Case v. Wilmington Trust, the Tennessee Supreme Court ushered in a sea change concerning constitutional standing in the state and 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.¹ Both developments are sure to have substantial impacts in Tennessee for years to come.

There are two main takeaways from the Case decision:

• 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 and many other states’ courts. And it could make nationwide class actions alleging violations of federal statutes far more common in Tennessee state courts.
• 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.

Factual and Procedural Background

After borrowing more than half a million dollars to purchase a property, Terry Case stopped making payments on his mortgage loan in 2013.² Over the next six years, he filed eight separate bankruptcy petitions to prevent Wilmington, the assignee of the deed of trust, from foreclosing.³ Wilmington finally obtained court approval to foreclose in 2019 and scheduled a sale for February 2020.⁴ Undeterred, Case filed suit in Tennessee state court and obtained a temporary restraining order, halting the impending sale. As a result of the order, a representative of the substitute trustee under the deed of trust appeared at the sale’s scheduled time and place and announced that it was postponed. Several days later, the temporary restraining order was dissolved, and the foreclosure sale proceeded as rescheduled.⁵

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 rescheduled sale, which he claimed violated the deed of trust’s notice of sale terms.⁶ 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.⁷ Case appealed, solely challenging the summary judgment on his wrongful foreclosure claim. The Tennessee Court of Appeals reversed, 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.⁸ In reaching that conclusion, the Court of Appeals held that “[w]rongful 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.’”⁹

Wilmington filed a Rule 11 petition, and the Tennessee Supreme Court accepted the appeal. Wilmington raised the following issues: “(1) whether Tennessee recognizes a common law cause of action for ‘wrongful foreclosure,’ and (2) whether the Fannie Mae/Freddie Mac Uniform Deed of Trust requires written notice of postponement in addition to oral announcement pursuant to section 35-5-101(f) of the Tennessee Code.”¹⁰ The Supreme Court also instructed the parties to address whether Case satisfied the requirements of constitutional standing.

A Sea Change in Tennessee Standing Law

All five justices ultimately agreed that Case had standing, but for different reasons. A four-justice majority drew a distinction between the standing requirements for cases brought to vindicate private rights as opposed to public rights. Chief Justice Holly Kirby disagreed with the majority’s interpretation of the Tennessee Constitution, but nevertheless agreed that Case had standing.

A decade ago in City of Memphis v. Hargett, the Tennessee Supreme Court reaffirmed the state’s adoption of federal standing jurisprudence, which requires that a litigant prove (1) injury in fact, (2) causation and (3) redressability to have constitutional standing to sue.¹¹ 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, regardless of whether the defendant actually did violate the statute.

The Case majority clarified that this framework only applies when a litigant is seeking to vindicate a public right. When a litigant is seeking to vindicate their “private rights,” they do not have to show they suffered an “injury in fact” to have standing. Rather, under Article I, Section 17 of the Tennessee Constitution, the so-called “Open Courts” provision, “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.”¹² Thus, the violation of a legal right, even if it that violation does not cause any “concrete harm,” is sufficient to confer constitutional 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.”¹³ Relying on City of Memphis, the court explained that public-rights cases implicate principles of separation of powers, which “prohibit[ ] the judicial branch from exercising any powers belonging to the executive or legislative branches.”¹⁴ Thus, to have standing in a public-rights case, a litigant must “allege an injury in fact not common to the public.”¹⁵

As applied to Case, he alleged “injuries to his contract rights and property rights,” therefore, his suit “allege[d] the violation of a private right, nothing more.”¹⁶ As a result, he did not need to allege an injury-in-fact to have standing.

While Chief Justice Kirby agreed that Case had standing, she saw things differently when it came to the proper interpretation of the Tennessee Constitution. According to the Chief Justice, the majority “turn[ed] the Open Courts provision on its head.”¹⁷ “By its plain text, Article I, Section 17 is a right and remedy clause, not a standing clause.” As a result, the clause “does not speak to standing or limit the jurisdiction of the courts in any way.”¹⁸ Instead, “the remedy clause establishes a floor on what courts must do; it does not establish a ceiling on what courts may do.”_¹⁹ So, while Tennessee courts “have declined to go beyond the floor established in the Open Courts provision” by requiring litigants to “allege injury to a recognized legal right,” in Chief Justice Kirby’s view, “nothing in the Open Courts provision imposes that limitation.”²⁰ Only time will tell whether the difference between Chief Justice Kirby’s and the majority’s interpretations of the Open Courts provision will have an impact on litigation in Tennessee.

No More Wrongful Foreclosure Claims in Tennessee

After concluding that Case had standing, the Supreme Court reversed the Court of Appeals, holding that “there is no common law cause of action for wrongful foreclosure in Tennessee.”²¹ 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.”²² 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.”²³ 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.”²⁴

The Consequences of the Case Decision

The Case decision will have far reaching impacts for both mortgage-related and non-mortgage-related litigation. As is obvious, the Case decision will change the landscape for 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. This effort will result in fewer cases alleging hyper-technical violations of deeds of trust filling the dockets of Tennessee courts.

One notable issue that remains outstanding after the Case decision is the notice requirements in the Fannie Mae/Freddie Mac Uniform Tennessee Deed of Trust. Because the Supreme Court concluded that Tennessee law does not recognize a standalone claim for wrongful foreclosure, 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. As Wilmington explained in its Rule 11 petition, the Uniform Deed of Trust at issue governs approximately $93.6 billion in unpaid principal mortgage debt on more than 500,000 residential mortgage loans across Tennessee. Thus, the proper interpretation of this instrument is a significant question left for another day.

Perhaps even more impactful than the Supreme Court’s wrongful-foreclosure ruling is the court’s reformulation of Tennessee standing doctrine. By drawing a distinction between lawsuits concerning private rights and those concerning public rights, the barrier to filing suit for an alleged violation of private rights is now far lower in Tennessee state court than it is in federal court. This will almost certainly lead to more lawsuits filed by individual litigants. And it may also lead to Tennessee becoming a hot bed for nationwide class actions concerning bare violations of federal statutes.

The U.S. Supreme Court has made clear that Congress can create private causes of action to enforce statutory violations. But it has also made clear that a statutory cause of action alone does not guarantee that a litigant has standing to vindicate it in federal court; rather, a statutory violation that causes concrete harm is required.²⁵ And in TransUnion v. Ramirez, the U.S. Supreme Court held that in class actions, “every class member must have Article III standing in order to recover individual damages.”²⁶

In his dissent — which could prove prophetic in Tennessee — Justice Clarence Thomas noted that em>TransUnion’s facially pro-defendant holding could prove to be a “pyrrhic victory” for class-action defendants.²⁷ He explained that the TransUnion majority did not “prohibit Congress from creating statutory rights for consumers; it simply h[eld] that federal courts lack jurisdiction to hear some of these cases.”²⁸ Since state courts “are not bound by the limitations of a case or controversy … even when they address issues of federal law,” Justice Thomas posited that TransUnion “ensured that state courts will exercise exclusive jurisdiction over these sorts of class actions.”²⁹

Tennessee’s state courts could become a popular venue for nationwide, no-injury, federal-law putative class actions as a result of the Tennessee Supreme Court’s standing decision in Case. Without a “concrete harm” requirement for private-rights lawsuits, litigants that suffer a bare violation of a federal statute, but suffer no actual injury, now have standing to sue in Tennessee state courts. And they may have standing to assert their claims on behalf of thousands of others across the country who suffered no actual injury, either.

Republished with permission. The original article, "One Domino Falls: Tennessee Supreme Court Reshapes Foreclosure Claims," was published by the Tennessee Bar Journal on March 3, 2025. 

Notes: 

1.  Terry Case v. Wilmington Tr., N.A., No. E2021-00378-SC-R11-CV, 703 S.W.3d 274, 2024 WL 4774863 (Tenn. Nov. 14, 2024).
2. Id. at *1.
3. Id.
4. Id.
5. Id.
6 Id.
7. Id. at *2.
8. Terry Case v. Wilmington Tr., N.A. as Tr. for Tr. MFRA 2014-2, No. E2021-00378-COA-R3-CV, 2022 WL 2313548, at *8 (Tenn. Ct. App. June 28, 2022).
9. Id. (quoting Garner v. Coffee Cnty. Bank, No. M2014-01956-COA-R3-CV, 2015 WL 6445601, at *10 (Tenn. Ct. App. Oct. 23, 2015)).
10. Case, 2024 WL 4774863, at *1.
11. 414 S.W.3d 88, 98 (Tenn. 2013). The City of Memphis court clarified that this standard applies to questions of constitutional standing as opposed to non-constitutional standing. The Case decision does not address non-constitutional standing.
12. Case, 2024 WL 4774863, at *9.
13. Id. at *11.
14. Id. at *9.
15. Id. at *11.
16. Id. at *12.
17. Id. at *15 (Kirby, C.J., concurring).
18. Id.
19. Id. (emphasis in original).
20. Id. at *16.
21. Id. at *15 (majority opinion).
22. Id. at *13.
23. Id. at *14.
24. Id. at *15.
25. See, e.g., TransUnion LLC v. Ramirez, 594 U.S. 413 (2021) (holding that class members must establish an injury-in-fact more than the bare statutory violation to be included in a class action); Spokeo Inc. v. Robins, 578 U.S. 330 (2016), as revised (May 24, 2016) (holding that the mere violation of a statutory right “divorced from any concrete harm” does not “satisfy the injury-in-fact requirement of Article III”).
26. TransUnion, 594 U.S. at 431 (emphasis added).
27. Id. at 459 n.9 (Thomas, J., dissenting).
28. Id.
29. Id.