On November 9, 2018, Malcolm B. Futhey III successfully had a lawsuit by Bank of America for a deficiency on a second mortgage dismissed for failure to satisfy the two-year statute of limitations. The defendant’s home had been foreclosed in December 2012 by the first mortgagee Wells Fargo. Bank of America, which held a second mortgage, alleged defendant still owed about $50,000 and filed suit for the deficiency in July 2017. In 2010, the Tennessee General Assembly amended the statute of limitations for deficiencies after a foreclosure to two (2) years. Tenn. Code Ann. § 35-5-118(d)(1). Malcolm Futhey argued that two-year statute of limitations applied to all deficiencies, including deficiencies allegedly owed to second mortgagees. Bank of America argued conversely that the two-year statute of limitations applied only to first mortgagees and that Bank of America had a six year statute of limitations based on its breach of contract claim related to the promissory note. The Court agreed that the two-year statute of limitations for deficiencies applied to second mortgages and dismissed Bank of America’s lawsuit with prejudice.
During a recent mortgage foreclosure case, a client owned a condominium with a primary a secondary mortgage. Issues arose between our client and the condominium’s ownership group over conditions of the property and ownership’s unwillingness to fix problems as they arose. This unwillingness led to a sharp decline in property value, leading our client to walk away from the property. After our client walked and stopped payments on the mortgages, the primary mortgage holder sold the condominium. The amount received was enough to cover only the primary mortgage. Five years later, the secondary mortgage provider filed a lawsuit against our client in attempt to recover those losses. In response to the lawsuit, Mr. Futhey filed a motion that states Tennessee law requires claims of this nature to be filed within two years of the foreclosure of the property. The second mortgage holder argued that this was not a second mortgage, but a loan. Following a review of the evidence, the court found the amount provided to be a second mortgage and, in not filing within the two-+year allowance period, the case was thrown out.