10/02/2018
IN THE COURT OF APPEALS OF TENNESSEE
AT NASHVILLE
August 21, 2018 Session
LAWRENCE B. HAMMET, II ET AL. v. WELLS FARGO BANK NA
Appeal from the Circuit Court for Davidson County
No. 17C7 Russell T. Perkins, Chancellor
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No. M2018-00352-COA-R3-CV
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This is a residential foreclosure case. Homeowners appeal the trial court’s dismissal of
their claims regarding the foreclosure of their home under Rule 12.02(6) of the Tennessee
Rules of Civil Procedure. Upon our review, we conclude that the Appellants’ claims
should not have been dismissed on a motion to dismiss. Accordingly, we reverse and
remand.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
Reversed and Remanded
KENNY ARMSTRONG, J., delivered the opinion of the court, in which J. STEVEN
STAFFORD, P.J., W.S., and BRANDON O. GIBSON, J., joined.
Donald Capparella, Nashville, Tennessee, for the appellants, Lawrence B Hammet, II,
and Mary B. Hammet.
Jonathan Cole and Brittany B. Simpson, Nashville, Tennessee, for the appellee, Wells
Fargo Bank NA.
MEMORANDUM OPINION1
1
Rule 10 of the Court of Appeals of Tennessee provides:
This Court, with the concurrence of all judges participating in the case, may affirm, reverse or
modify the actions of the trial court by memorandum opinion when a formal opinion would have no
precedential value. When a case is decided by memorandum opinion it shall be designated
“MEMORANDUM OPINION”, shall not be published, and shall not be cited or relied on for any reason
in any unrelated case.
I. Background
This is an appeal of a residential foreclosure sale. On a motion to dismiss, the trial
court dismissed the homeowners’ claims against their mortgage lender for its refusal to
postpone a foreclosure sale. Mary and Lawrence Hammett (Appellants) owned a house
at 4206 Sneed Road in Nashville. In July 2015 and in February 2016, Wells Fargo
(Appellee) notified Appellants that they had defaulted under their note and deed of trust
and issued notice of a foreclosure sale. On both occasions, Appellants requested that the
foreclosure sale be postponed to allow them time to pay the reinstatement fee. Although
Appellants possessed sufficient funds to pay the reinstatement fee, they feared they
would not be able to withdraw the full amount from their 401(k) in time to meet the
deadline for reinstatement. On both occasions, Wells Fargo granted Appellants’ request
for an extension, and Appellants submitted the full amount of the reinstatement fee prior
to the extensions granted. Following payment by Appellants, Wells Fargo cancelled the
foreclosure sales.
In October 2016, Wells Fargo notified Appellants that they were in default on their
mortgage for a third time and scheduled a foreclosure sale for November 30, 2016. Wells
Fargo informed Appellants that they would need to pay $25,014.10 to reinstate their loan.
Although Appellants possessed the necessary amount of money in their 401(k) account,
they again feared they would not have access to the funds until after the sale date, so they
requested an extension. Wells Fargo agreed to postpone the foreclosure sale to January 4,
2017, and notified Appellants that the new deadline for paying the reinstatement fee was
December 30, 2016. Wells Fargo also informed Appellants that the old reinstatement fee
was no longer accurate and that a new fee had to be calculated to account for the added
time. For reasons not stated in the record, Wells Fargo did not provide the new
reinstatement amount until mid-December. The new reinstatement amount was
$29,559.37, and the funds Appellants had previously withdrawn were not sufficient to
pay the increased reinstatement amount. In order to pay the charges in full, Appellants
needed to withdraw additional funds from their 401(k), which would require a minimum
of ten business days to process.
Appellants feared that they would not meet the December 30th deadline due to the
Christmas and New Year’s Day holidays, so they submitted a written request to postpone
the January 4, 2017 sale to allow them time to access their funds. Appellants also
submitted a statement from their 401(k) account evidencing sufficient funds to pay the
reinstatement fee. When Appellants did not hear back from the bank, they followed up
by telephone on December 22, 2016, and were informed that their request for
postponement had been denied. No explanation for the decision was given. During a
subsequent conversation, Wells Fargo informed Appellants that their last option to obtain
a postponement of the foreclosure sale was to submit an executed contract for the sale of
the property with documentation evidencing proof that the buyers possessed the
necessary funds to close. Appellants complied with this instruction and found a buyer
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and submitted all the required documentation via facsimile to Wells Fargo on December
30, 2016.
On the morning of January 3, 2017, Appellants had not heard from Wells Fargo,
so they resubmitted the documentation via facsimile. Shortly thereafter, Appellants
called Wells Fargo to inquire about the status of their request for postponement and
learned that their December 30th request had never been submitted to the appropriate
department for review. Later that evening, despite their full compliance with Wells
Fargo’s instructions to obtain a postponement, Wells Fargo informed Appellants that
their request to postpone the foreclosure sale had been denied. No further explanation
was given. At approximately 9:30 a.m. on January 4, 2017, Appellants filed their initial
complaint seeking an injunction against the sale. At 10:00 a.m., the sale took place as
scheduled, and the Sneed Road property was sold to a third party for $562,000.00. At
approximately 10:30 a.m., the trial court granted Appellants’ request for a restraining
order prohibiting Wells Fargo from conveying the property via foreclosure sale.
On January 9, 2017, Appellants filed their first amendment to their initial verified
complaint asserting additional claims including (1) breach of deed of trust, (2) intentional
misrepresentation, and (3) wrongful foreclosure. On February 24, 2017, Wells Fargo
filed a motion to dismiss the complaint on all counts for failure to state a claim for which
relief could be granted. On March 16, 2017, the trial court dismissed Appellants’ action
for failure to state a claim upon which relief can be granted.
During a subsequent hearing, the trial court determined that the March 16, 2017
order was not a final order. On April 6, 2017, Appellants filed a motion to file a second
amendment to the complaint, or, in the alternative, a motion for permission for an
interlocutory appeal. The trial court granted Appellants’ motion to file a second
amendment to their complaint by order dated October 20, 2017. On November 3, 2017,
Appellants filed the second amended complaint adding claims for (1) breach of the
agreement, (2) breach of the covenant of good faith and fair dealing, and (3) promissory
estoppel. On November 16, 2017, Wells Fargo moved to dismiss the second amended
complaint, arguing that the new claims added in the second amended complaint should
fail as a matter of law. On January 29, 2018, the trial court issued a final order
dismissing the second amended complaint for failure to state a claim upon which relief
could be granted. Appellants appeal.
II. Issues
Appellants raise three issues for review as stated in their brief:
1. Did the trial court err in dismissing the [Appellants’] claim that the
[Appellee] breached its implied duty of good faith and fair dealing
where the [Appellee] interfered with the [Appellants’] contractual
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right to reinstate their loan by waiting several weeks to notify
[Appellants] of the reinstatement amount they needed to pay in order
to cure their default, leaving them with an insufficient number of
business days to withdraw the funds necessary to make the payment?
2. Did the trial court err in dismissing the [Appellants’] claim for
promissory estoppel where the [Appellee] failed to honor its promise
to cancel the foreclosure sale upon receipt of a contract for the sale
of the property with proof of the buyer’s ability to pay?
3. Did the trial court err in dismissing the [Appellants’] claim for
promissory estoppel where the [Appellee] implicitly agreed through
pattern and practice to postpone a foreclosure sale when provided
with proof of the [Appellants’] ability to pay their reinstatement fee?
III. Standard of Review
A motion to dismiss based upon Tennessee Rule of Civil Procedure 12.02(6)
requires a court to determine if the pleadings state a claim upon which relief may be
granted. Tenn. R. Civ. P. 12.02(6); Cullum v. McCool, 432 S.W.3d 829, 832 (Tenn.
2013). A Rule 12.02(6) motion challenges “only the legal sufficiency of the complaint,
not the strength of the plaintiff’s proof or evidence.” Webb v. Nashville Area Habitat for
Humanity, Inc., 346 S.W.3d 422, 426 (Tenn. 2011); Highwoods Props., Inc. v. City of
Memphis, 297 S.W.3d 695, 700 (Tenn. 2009). A defendant filing a motion to dismiss
“admits the truth of all the relevant and material allegations contained in the complaint,
but ... asserts that the allegations fail to establish a cause of action.” Brown v. Tenn. Title
Loans, Inc., 328 S.W.3d 850, 854 (Tenn. 2010) (quoting Freeman Indus., LLC v.
Eastman Chem. Co., 172 S.W.3d 512, 516 (Tenn. 2005)). The resolution of such a
motion is determined by examining the pleadings alone. Webb, 346 S.W.3d at 426;
Leggett v. Duke Energy Corp., 308 S.W.3d 843, 851 (Tenn. 2010); Trau-Med of Am.,
Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 696 (Tenn. 2002).
In adjudicating such motions, courts “must construe the complaint liberally,
presuming all factual allegations to be true and giving the plaintiff the benefit of all
reasonable inferences.” Webb, 346 S.W.3d at 426 (quoting Tigg v. Pirelli Tire Corp., 232
S.W.3d 28, 31-32 (Tenn. 2007)); Cullum, 432 S.W.3d at 832. A motion to dismiss
should be granted only if it appears that “the plaintiff can prove no set of facts in support
of the claim that would entitle the plaintiff to relief.” Crews v. Buckman Labs. Int'l, Inc.,
78 S.W.3d 852, 857 (Tenn. 2002); see Lanier v. Rains, 229 S.W.3d 656, 660 (Tenn.
2007). Tennessee jurisprudence on this issue “reflects the principle that this stage of the
proceedings is particularly ill-suited for an evaluation of the likelihood of success on the
merits....” Cullum, 432 S.W.3d at 832 (quoting Webb, 346 S.W.3d at 437). As such,
these motions are not favored and are rarely granted in light of the liberal pleading
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standards in the Tennessee Rules of Civil Procedure. Dobbs v. Guenther, 846 S.W.2d
270, 273 (Tenn. Ct. App. 1992); Barish v. Metropolitan Government, 627 S.W.2d 953,
954 (Tenn. Ct. App. 1981). We review a lower court’s decision on such a motion de
novo without any presumption of correctness. Phillips v. Montgomery Cty., 442 S.W.3d
233, 237 (Tenn. 2014).
IV. Analysis
A. Waiver
As a preliminary matter, we must address Appellee’s argument that Appellants
waived their claim regarding promissory estoppel, which was based on Appellee’s
promise to cancel the foreclosure sale upon receipt of a signed contract for sale of the
property with proof of the buyer’s ability to pay. Appellee argues that Appellants failed
to properly plead this theory in any of their filings.
To be sufficient and survive a motion to dismiss, a complaint must not be entirely
devoid of factual allegations. Rule 8 of the Tennessee Rules of Civil Procedure contains
the general rules of pleading and has been construed “so as to minimize the role of
pleadings in civil litigation and to de-emphasize technicalities in favor of decisions on the
merits.” Millen v. Shelby Cty. Dist. Attorney Office, No. W2011-00303-COA-R3-CV,
2011 WL 3246000, at *4 (Tenn. Ct. App. July 29, 2011) (quoting Banks & Entman,
Tennessee Civil Procedure § 5-4(a) (3d ed. 2009)). Tennessee courts have long
interpreted Tennessee Rule of Civil Procedure 8.01 to require a plaintiff to state “the facts
upon which a claim for relief is founded.” Smith v. Lincoln Brass Works, Inc., 712
S.W.2d 470, 471 (Tenn. 1986) (quoting W & O Constr. Co. v. City of Smithville, 557
S.W.2d 920, 922 (Tenn. 1977)). Rule 8.01 has not been amended and still only requires
“(1) a short and plain statement of the claim showing that the pleader is entitled to relief,
and (2) a demand for judgment for the relief the pleader seeks.” Webb 346 S.W.3d at
437. A complaint “need not contain detailed allegations of all the facts giving rise to the
claim,” but it “must contain sufficient factual allegations to articulate a claim for relief.”
Abshure v. Methodist Healthcare-Memphis Hosp., 325 S.W.3d 98, 103-04 (Tenn.
2010). “The facts pleaded, and the inferences reasonably drawn from these facts, must
raise the pleader’s right to relief beyond the speculative level.” Id. at 104.
This Court has previously defined a claim as denoting “the aggregate of operative
facts which give rise to a right enforceable in the courts.” Christus Gardens, Inc. v.
Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., No. M2007-01104-COA-R3-
CV, 2008 WL 3833613, at *5 (Tenn. Ct. App. Aug.15, 2008), no perm. app. (quoting
McIntyre v. First Nat'l Bank of Cincinnati, 585 F.2d 190, 191 (6th Cir. 1978)). Thus,
“a complaint asserting only one legal right, even if seeking multiple remedies for the
alleged violation of that right, states a single claim for relief.” Id. (quoting Liberty Mut.
Ins. Co. v. Wetzel, 424 U.S. 737, 744, 96 S. Ct. 1202, 47 L.Ed.2d 435 (1976)). As a
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general rule, issues addressed by the appellate courts should be limited to those that have
been raised and litigated in the lower courts, Baugh v. Novak, 340 S.W.3d 372, 381
(Tenn. 2011); see Pugh’s Lawn Landscape Co. v. Jaycon Dev. Corp., 320 S.W.3d 252,
260 (Tenn. 2010); Powell v. Cmty. Health Sys., Inc., 312 S.W.3d 496, 511 (Tenn. 2010).
Although Tennessee case law does not address the exact level of specificity
required for an issue to be raised in the trial court, the Tennessee Supreme Court has
stated that “[d]etermining whether parties have waived their right to raise an issue on
appeal should not exalt form over substance.” Powell, 312 S.W.3d at 511. The fact that
the party phrased the question or issue in the trial court in a different way than it does on
appeal does not amount to a waiver of the issue. Fahrner v. SW Mfg., Inc., 48 S.W.3d
141, 143 n. 1 (Tenn. 2001) (noting that “the failure to use the right label does not result in
a waiver”). “Appellate courts must carefully review the record to determine whether a
party is actually raising an issue for the first time on appeal.” First Community Bank,
N.A. v. First Tennessee Bank, N.A., 489 S.W.3d 369, 402 (Tenn. 2015) (quoting Powell,
312 S.W.3d at 511).
The United States Supreme Court has provided guidance on what is necessary to
avoid waiver. In Yee v. City of Escondido, 503 U.S. 519 (1992), a case involving a city’s
taking of private property, the petitioners argued before the trial court that the city’s
actions constituted a physical taking. Id. at 534. By the time the case reached the
Supreme Court, the petitioners revised their argument to include a regulatory taking in
addition to the physical taking. Id. The Supreme Court opined:
Once a . . . claim is properly presented, a party can make any argument in
support of that claim; parties are not limited to the precise arguments they
made below. Bankers Life & Casualty Co. v. Crenshaw, 486 U.S. 71, 78,
n. 2, 108 S. Ct. 1645, 1650, n. 2, 100 L.Ed.2d 62 (1988); Gates, supra, 462
U.S., at 219-220, 103 S. Ct., at 2322-2323; Dewey v. Des Moines, 173 U.S.
193, 197-198, 19 S. Ct. 379, 380-381, 43 L. Ed. 665 (1899). Petitioners’
arguments that the ordinance constitutes a taking in two different ways, by
physical occupation and by regulation, are not separate claims. They are,
rather, separate arguments in support of a single claim. . . . Having raised a
. . . claim in the state courts, therefore, petitioners could have formulated
any argument they liked in support of that claim here.
Id. at 534-35.
With the foregoing in mind, we turn to consider whether Appellants pled
promissory estoppel in their complaints. In their second amendment, Appellants clearly
state a claim for promissory estoppel. Their pleading details their argument for
promissory estoppel on the ground that Appellee implicitly agreed to postpone the
foreclosure sale upon receipt of proof of the Appellants’ ability to pay the reinstatement
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fee. Additionally, paragraph 11 of the initial verified complaint for injunctive relief and
for damages alleged the following facts:
A Wells Fargo Home Mortgage representative informed [Appellants] the
last option available to postpone the foreclosure sale would be the submittal
of documentation representing an executed contract for the sale of the
property along with documentation evidencing proof of funds were
available to the buyers to complete and close the sales contract for the
property. The Wells Fargo representative provided explicit instruction as to
how the request and supporting information for the private sale of the
property was to be submitted. The Wells Fargo representative confirmed
when the information was received it would be immediately presented to
the department in charge of reviewing the request and package of
information. In following the instructions from Wells Fargo, [Appellants]
submitted a copy of the executed contract to sell the property along with the
buyer’s proof of funds by facsimile to Wells Fargo at approximately 3:49
p.m. central time on December 30, 2016.
Appellants attached as exhibits all of the documents required by Wells Fargo including
an executed contract offering to buy Appellants’ home for $700,000. Although
Appellants set forth very specific facts regarding the executed contract for sale, these
facts are not restated in connection with their claim for promissory estoppel. Rather they
are referred to as if set out in full under the promissory estoppel heading of the second
amendment to the complaint. In Yee, the Supreme Court concluded that “[a] litigant
seeking review in this Court of a claim properly raised in the lower courts thus generally
possesses the ability to frame the question to be decided in any way he chooses, without
being limited to the manner in which the question was framed below.” Yee, 503 U.S. at
535. Therefore, we conclude that Appellants offered alternative theories in pursuit of
recovery on the basis of promissory estoppel, and that they properly raised the issue of
promissory estoppel in the trial court below.
Appellee also argues that Appellants waived their claim that Wells Fargo
“breached its implied duty of good faith and fair dealing where [Appellee] interfered with
[Appellant’s] contractual right to reinstate their loan” by waiting several weeks to provide
the reinstatement amount needed to cure the default. Like the claim for promissory
estoppel, Appellee alleges that Appellants failed to properly plead this claim. With
regard to the breach of the covenant of good faith and fair dealing, Appellants’ factual
allegations regarding this claim in their initial complaint were very detailed. Appellants
further averred in their second amended complaint that the Agreement between the
parties establishes the agreed upon procedure for rescheduling a foreclosure sale and that
Wells Fargo’s refusal to honor the terms of the Agreement was without any basis and
“stands as Wells Fargo’s breach of its implied covenant of good faith and fair dealing
with respect to the Agreement.” Using the Yee analysis detailed above, we conclude that
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Appellants properly raised the breach of the covenant of good faith and fair dealing as a
claim in the trial court.
B. Dismissal Under Tennessee Rule of Civil Procedure 12.02(6)
In this case, we must determine whether Appellants’ claims were properly
dismissed on motions under Rule 12.02(6) of the Tennessee Rules of Civil Procedure.
Rule 12.02 of the Tennessee Rules of Civil Procedure states in pertinent part:
Every defense, in law or fact, to a claim for relief in any pleading, whether
a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in
the responsive pleading thereto if one is required, except that the following
defenses may at the option of the pleader be made by motion in writing:
***
(6) failure to state a claim upon which relief can be granted
***
If, on a motion asserting the defense numbered (6) to dismiss for failure to
state a claim upon which relief can be granted, matters outside the pleading
are presented to and not excluded by the court, the motion shall be treated
as one for summary judgment and disposed of as provided in Rule 56, and
all parties shall be given reasonable opportunity to present all material
made pertinent to such a motion by Rule 56.
Tenn. R. Civ. P. 12.02.
Here, the trial court dismissed the case under Rule 12.02(6) and did not treat it as a
motion for summary judgment. There are exceptions to the general rule that a court must
convert a Rule 12.02(6) motion to a motion for summary judgment if the court considers
matters outside the pleadings. Stephens v. Home Depot U.S.A., Inc., 529 S.W.3d 63, 74
(Tenn. Ct. App. 2016), perm. app. denied (Tenn. Apr. 13, 2017). Courts resolving a
motion to dismiss may consider “items subject to judicial notice, matters of public record,
orders, [and] items appearing in the record of the case ... without converting the motion
into one for summary judgment.” Haynes v. Bass, No. W2015-01192-COA-R3-CV,
2016 WL 3351365, at *4 (Tenn. Ct. App. June 9, 2016), perm. app. denied (Tenn. Oct.
21, 2016) (quoting Ind. State Dist. Council of Laborers v. Brukardt, No. M2007-02271-
COA-R3-CV, 2009 WL 426237, at *8 (Tenn. Ct. App. Feb. 19, 2009)); see also Cochran
v. City of Memphis, No. W2012-01346-COA-R3-CV, 2013 WL 1122803, at *2 (Tenn.
Ct. App. Mar. 19, 2013) (concluding that consideration of the existing complaint, a prior
complaint, and various orders did not require conversion to a motion for summary
judgment).
The record indicates that the parties submitted documents for consideration by the
trial court, including an adjustable rate note, a deed of trust, an executed contract for sale,
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buyer’s proof of funds to close, correspondence dated January 3, 2017 from Appellee
stating that Appellants’ request for postponement to consider the sales contract was under
review, and purchase documents from the foreclosure sale. The trial court did not state
expressly or by implication what documents were considered in making its decision to
dismiss Appellants’ claims. The plain language of Rule 12.02 states that if “matters
outside the pleadings are presented to and not excluded by the court, the motion shall be
treated as one for summary judgment.” Tenn. R. Civ. P. 12.02 (emphasis added). It is
unclear from the record in this case what matters outside the pleadings were considered
by the trial court. Considering the many findings contained in the trial court’s orders
granting the motion to dismiss, we conclude that the orders entered by the trial court are
more akin to an order on summary judgment rather than an order on a motion to dismiss.
Rule 56.04 of the Tennessee Rules of Civil Procedure states in relevant part:
Subject to the moving party’s compliance with Rule 56.03, the judgment
sought shall be rendered forthwith, if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.
Tenn. R. Civ. P. 56.04; Rye v. Women's Care Ctr. of Memphis, MPLLC, 477 S.W.3d
235, 250 (Tenn. 2015); Martin v. Norfolk Southern Railway Co., 271 S.W.3d 76, 83
(Tenn. 2008). In order to assist the court in ascertaining whether there are any material
facts in dispute, Rule 56.03 sets out an orderly process for organizing and dealing with
the evidence presented in connection with a summary judgment motion, which includes
submission by the moving party of “a concise statement of the material facts as to which
the moving party contends there is no genuine issue for trial.” Tenn. R. Civ. P. 56.03.
The rule also allows the opposing party to file a response as to each fact asserted by the
moving party and to submit his own statement of additional facts that he or she asserts are
material. Id. To that end, Appellants should have been allowed a reasonable
opportunity, prior to the hearings on the Rule 12.02(6) motions, to pursue discovery in
order to obtain information made pertinent by a summary judgment motion. See
International Merchant Services, Inc. v. ATM Central, LLC, No. W2003-00849-COA-
R3-CV, 2004 WL 170392 (Tenn. Ct. App. 2004) (dismissal of complaint pursuant to
Rule 12.02(6) reversed because trial court considered extraneous evidence, but did not
treat the motion in accordance with the procedures for summary judgment). Also, the
parties in this case should have been afforded a reasonable opportunity to present
memoranda in support of or in opposition to a motion for summary judgment along with
statements of undisputed material fact and any other supporting documentation. Only
after such information and documentation is obtained can the trial court make an
intelligent ruling as to whether disputes of material fact exist and whether either of the
parties is entitled to summary judgment as a matter of law. For the purposes of granting
the parties this opportunity, the case should be remanded to the trial court.
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V. Conclusion
For the foregoing reasons, the orders of the trial court granting Appellee’s motions
to dismiss are reversed, and the case is remanded to the trial court for such further
proceedings as may be necessary. Costs of this appeal are assessed against the Appellee,
Wells Fargo Bank, NA, for all of which execution may issue if necessary.
_________________________________
KENNY ARMSTRONG, JUDGE
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