Swift v. Kirby
1987 Tenn. LEXIS 958, 737 S.W.2d 271 (1987)
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Rule of Law:
Under Tennessee law, the use of the phrase “equity of redemption” in a deed of trust constitutes an express waiver of the statutory right of redemption. The historical and common usage of the term by courts and the legislature has pervasively established that it encompasses the post-foreclosure statutory right.
Facts:
- Plaintiff Swift executed a deed of trust to Commerce Union Bank, securing a $10,000 note with his real property.
- The deed of trust contained a clause stating the conveyance was “free from equity of redemption...which are hereby expressly waived.”
- Swift defaulted on the note.
- The property was sold at a trustee's foreclosure sale on July 1, 1982, to defendants Mangum, Tanley, Tanley & Davenport (Mangum) for $8,500.
- Mangum later sold the property to defendants Kirby for $44,800.
- On June 29, 1984, nearly two years after the foreclosure sale, Swift sought to redeem the property.
Procedural Posture:
- Swift filed suit in a Tennessee trial court against Mangum and the Kirbys, seeking to redeem the property.
- The trial judge held that Swift had not waived the statutory right of redemption but dismissed the suit due to an improper tender of redemption funds.
- Swift appealed to the Tennessee Court of Appeals.
- The Court of Appeals affirmed the trial court's finding that the right was not waived but reversed on the tender issue, ruling in favor of Swift's right to redeem.
- The Kirbys and Mangum, the appellees at the Court of Appeals, sought review from the Supreme Court of Tennessee.
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Issue:
Does a borrower's waiver of the “equity of redemption” in a deed of trust also operate as a waiver of the statutory right to redeem real property after a foreclosure sale under Tennessee law?
Opinions:
Majority - Fones, Justice
Yes, a waiver of the “equity of redemption” operates as a waiver of the statutory right of redemption. Although a technical distinction exists between the equitable right (pre-foreclosure) and the statutory right (post-foreclosure), the court found that Tennessee courts, the legislature, and legal practitioners have pervasively used the phrase “equity of redemption” to refer to the statutory right since its creation in 1820. The court reasoned that if the phrase did not waive the statutory right, the waiver would be meaningless, as no other right of redemption was in common use or legally recognized in this context. Citing numerous historical cases and statutes, the court concluded that common usage and legal context established the parties' intent to waive the post-foreclosure statutory right. Therefore, the recent legislative amendment codifying this interpretation was a constitutional clarification of existing law, not an unconstitutional retrospective change.
Analysis:
This decision harmonizes the legal interpretation of a common contractual term with long-standing industry practice in Tennessee, providing significant stability and certainty to real estate transactions. By rejecting a hyper-technical distinction between the equitable and statutory rights of redemption, the court reinforces the finality of foreclosure sales where such waivers are present, protecting lenders and subsequent purchasers. The ruling establishes that the historical and practical meaning of a legal term of art can override its narrow, original definition. This precedent solidifies the power of an express waiver using the phrase “equity of redemption” and prevents debtors from using linguistic ambiguity to unwind otherwise valid foreclosures.
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