664 B.R. 740
Bankr. E.D. Tenn.2024Background
- Debtor Jennifer Nicole Smith and a co-debtor executed a loan and deed of trust in 2020 to purchase a manufactured home and real property in Tennessee, granting 21st Mortgage Corporation a lien.
- Both defaulted, prompting 21st Mortgage to initiate a non-judicial foreclosure, with the sale noticed for March 27, 2024.
- The foreclosure sale proceeded as noticed, and 21st Mortgage, making a credit bid, was the sole bidder.
- Smith filed for bankruptcy on April 3, 2024, after the foreclosure sale but before the Substitute Trustee's Deed was executed (April 8) and recorded (April 9).
- Smith’s Chapter 13 plan tried to treat the property as part of her bankruptcy estate and proposed to cure arrears and continue payments to 21st Mortgage.
- 21st Mortgage sought relief from the automatic stay, arguing the sale finalized pre-petition, leaving Smith with no estate interest in the property.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was foreclosure sale final before bankruptcy so property isn't estate? | Smith: Incomplete, as deed unsigned pre-petition | 21st Mtg: Sale final per statute of frauds with electronic records | Yes, sale was final – property not in estate |
| Did creditor provide consideration for sale? | Smith: No proof of consideration | 21st Mtg: Parties stipulated credit bid/cancellation of debt was consideration | Consideration existed via credit bid |
| Did the foreclosure documentation satisfy the statute of frauds? | Smith: Challenges sufficiency | 21st Mtg: Combination of documents & electronic signatures suffice | Yes, satisfied by electronic records |
| Does the automatic stay apply to the property? | Smith: Implied, since property included in plan | 21st Mtg: No, property not in estate | No, stay doesn't apply – motion moot |
Key Cases Cited
- In re Williams, 247 B.R. 449 (Bankr. E.D. Tenn. 2000) (Foreclosure finality under Tennessee law upon satisfaction of statute of frauds).
- Waddle v. Elrod, 367 S.W.3d 217 (Tenn. 2012) (Electronic records and signatures suffice for statute of frauds under UETA).
- In re Johnson, 213 B.R. 134 (Bankr. W.D. Tenn. 1997) (Execution of deed as writing required for statute of frauds in foreclosures).