Court Opinion

ID: 5140868
Source: CourtListenerOpinion
Date Created: 2021-12-27 21:15:16.872916+00
Date Added: 2024-06-11T08:24:26.160234
License: Public Domain

12/27/2021
                IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                               September 1, 2020 Session

              CHARLENE C. BRADFORD v. JOSH TERRY ET AL.

              Appeal from the Chancery Court for Williamson County
              No. 43291, 2014-201    James G. Martin III, Chancellor
                      ___________________________________

                           No. M2019-01340-COA-R3-CV
                       ___________________________________

To avoid foreclosure, a homeowner and her daughter made a deal to sell their home. The
purchasers paid off the mortgage and, after acquiring title, leased the home back to the
daughter with an option to purchase. When the daughter failed to make timely lease
payments, the purchasers sued for possession of the home. The (former) homeowner filed
her own suit, alleging that the transaction was an equitable mortgage subject to rescission
under the Federal Truth in Lending Act. She also alleged that the transaction violated
Tennessee’s Foreclosure-Related Rescue Services Act. Following a trial, the court agreed
that the transaction created an equitable mortgage that violated the Truth in Lending Act.
So, under the federal act, the court rescinded the transaction and awarded damages and
attorney’s fees. The court dismissed the claims under the Foreclosure-Related Rescue
Services Act after determining it was inapplicable. On appeal, we conclude that the
Foreclosure-Related Rescue Services Act, rather than the Truth in Lending Act, applied.
We affirm the trial court’s rescission of the transaction under the state act. We reverse the
awards under the Truth in Lending Act.

 Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed
            in Part, Reversed in Part, and Vacated in Part; Remanded

W. NEAL MCBRAYER, J., delivered the opinion of the court, in which D. MICHAEL SWINEY,
C.J., and ANDY D. BENNETT, J., joined.

Timothy V. Potter and Andrew E. Mills, Dickson, Tennessee, for the appellants, Chris
Mulé, Donna Mulé, Josh Terry, Terri Baker, and Ryan White.

David J. Tarpley, Nashville, Tennessee, and Rae Anne Smith, Tullahoma, Tennessee, for
the appellees, Charlene Bradford and Courtney Varallo.
                                            OPINION

                                                 I.

                                                 A.

       Following her husband’s death, Charlene Bradford and her adult daughter, Courtney
Varallo, took out a loan to pay burial expenses, hospital bills, and living expenses. As
security, Ms. Bradford signed a deed of trust for the home she co-owned with her late
husband. Ms. Bradford shared the home with Ms. Varallo and Ms. Varallo’s two children.

       When the loan came due one year later, Ms. Bradford and Ms. Varallo could not
pay. They attempted to refinance the loan, but those efforts proved unfruitful. Then, two
days before the scheduled foreclosure sale, a mortgage banker suggested that Chris Mulé,
one of the owners of Tennessee Title Services, LLC, might be a possible source of
financing.

      Ms. Bradford and Ms. Varallo contacted Mr. Mulé, who proposed that the parties
meet at his office the next day. In the interim, Mr. Mulé determined the pay-off for the
mortgage and ran a title search. The title search revealed a judgment lien on the property
and some back taxes.

       At the meeting with Mr. Mulé, the day before the scheduled foreclosure, Ms.
Bradford recalled him saying, “We can help you.” And he said, “There will be some
stipulations, but we can help you save your home, so no problem.” The help took the form
of three documents. The first document was a Purchase and Sale Agreement. The
agreement obligated Ms. Bradford to sell the property under threat of foreclosure,
consisting of the home and nearly 7 acres, for $51,000. The purchasers under the
agreement were Mr. Mulé’s wife, Donna Mulé, and the other owners of Tennessee Title
Services, Josh Terry, Ryan White, and Terri Baker. Mr. Mulé would later testify that he
wanted the property in his wife’s name rather than his own for estate planning purposes.
The second document was a warranty deed transferring the property to Ms. Mulé,
Mr. Terry, Mr. White, and Ms. Baker.

       The third and final document was a Lease Purchase Agreement. That agreement
allowed Ms. Bradford’s daughter, Ms. Varallo, to lease the property in exchange for
monthly rent payments of $500. Ms. Mulé, Mr. Terry, Mr. White, and Ms. Baker also
granted Ms. Varallo the option to purchase the property for $61,000, but only if the option
was exercised and the sale was closed by the one-year anniversary of the agreement.1

      1
          The Lease Purchase Agreement provided as follows:

                                                 2
Thereafter, the option price increased to $71,000. The option expired and Ms. Varallo had
to vacate the property on a specified date, just over two years after the date of the
agreement. But the agreement did not obligate Ms. Varallo to lease the property for a fixed
term.

        After the agreements and the deed were signed, Ms. Mulé, Mr. Terry, Mr. White,
and Ms. Baker paid $48,655.14 to pay-off the loan in foreclosure and to satisfy the
judgment lien. Although the total amount paid to satisfy the loan and the judgment was
less than the agreed purchase price, Ms. Bradford received no monies from the sale.

       Ms. Bradford read the agreements and the deed and claimed to understand them.
But, despite that, Ms. Bradford thought she and her daughter were getting a loan. When
asked later about the terms of the loan, she testified, “It was a two-year loan, and then we
had options, you know, to buy before the – in those two years.” The cost of borrowing was
“[$]10,000 a year for those two years.” Ms. Bradford also thought that the property was
being taken out of her name and put in her daughter’s name. She did not like that, but she
understood it to be necessary because only her daughter had a job.

       According to Ms. Bradford, she understood the true nature of the transaction several
weeks after the closing. Ms. Bradford’s sister, Barbara Grinder, became concerned after
Ms. Bradford described the transaction to her. So Ms. Grinder checked the property tax
records, which confirmed that Ms. Varallo was not the owner.

       Meanwhile, due to an illness, Ms. Varallo was having difficulty making timely rent
payments. The delinquency led Ms. Mulé, Mr. Terry, Mr. White, and Ms. Baker to declare
Ms. Varallo in default of the Lease Purchase Agreement. Ms. Grinder tried to intervene.
But her offer to pay the option price on behalf of Ms. Varallo was declined. According to
Mr. Terry, the right to purchase the property at the option price belonged exclusively to
Ms. Varallo. So he told Ms. Grinder that he and the other owners would only sell the
property to her for fair market value.

       The purchase price for the Property is $61,000.00 (If Buyer completes purchase on or before
       July 17, 2013.)

              ....

       In the event Buyer does not complete the purchase of subject property on or before July
       17, 2013, the sales price will increase to the sum of SEVENTY-ONE THOUSAND
       AND 00/100 DOLLARS ($71,000.00), on August 1, 2013. If closing of this transaction
       has not taken place by August 1, 2014, the Lease Purchase Agreement becomes NULL
       AND VOID AND BUYER MUST VACATE SUBJECT PROPERTY
       IMMEDIATELY.

                                               3
      Ms. Bradford attempted to keep the rent payment current. But when one of her
checks was returned, Ms. Mulé, Mr. Terry, Mr. White, and Ms. Baker terminated the Lease
Purchase Agreement.

                                            B.

       Ms. Mulé, Mr. Terry, Mr. White, and Ms. Baker filed a detainer action against
Ms. Varallo. In response, Ms. Bradford and Ms. Varallo gave notice that they were
rescinding the sale/leaseback transaction under the Truth in Lending Act (“TILA”) and
Regulation Z. See 15 U.S.C. § 1635 (Supp. 2019); 12 C.F.R. § 1026.23 (2021).

       Ms. Bradford also filed a complaint against Mr. and Ms. Mulé, Mr. Terry,
Mr. White, and Ms. Baker (collectively, “Defendants”).          She claimed that the
sale/leaseback transaction was an equitable mortgage. Ms. Bradford alleged that Mr. Mulé
committed fraud by misrepresenting the true nature of the transaction and that those
fraudulent misrepresentations should be imputed to Ms. Mulé, Mr. Terry, Mr. White, and
Ms. Baker. She also alleged that Defendants, through Mr. Mulé, violated the Tennessee
Consumer Protection Act (“TCPA”) by “[r]epresenting that a consumer transaction confers
or involves rights, remedies or obligations that it does not have or involve which are
prohibited by law.” See Tenn. Code Ann. § 47-18-104(b)(12) (Supp. 2021).

       For relief, Ms. Bradford sought to set aside or reform the transaction. She claimed
that the transaction was void and unenforceable under the Foreclosure-Related Rescue
Services Act. See id. §§ 47-18-5401-5402 (2013). She claimed that Defendants had
engaged in unconscionable conduct by, in effect, making a loan at a usurious rate. So
Defendants could not recover any interest or charges. See id. § 47-14-117(c) (2013). And
she claimed that the transaction should be rescinded under TILA. See 15 U.S.C. § 1635(a).
Ms. Bradford also sought damages, statutory penalties, and attorney’s fees.

       Defendants answered and asserted counterclaims against Ms. Bradford. They
sought damages and attorney’s fees under the bad check statute. See Tenn. Code Ann.
§ 47-29-101 (2013). They claimed that, by her actions, Ms. Bradford became liable under
the Lease Purchase Agreement. And they requested damages based on unjust enrichment
and fraud.

       The detainer action filed against Ms. Varallo and the action filed against Defendants
were consolidated in the chancery court. And the court conducted a one-day trial. The
court held that the transaction was an equitable mortgage. The court reasoned that Ms.
Bradford and Ms. Varallo were indebted to Defendants by virtue of the purchase option.
They were “required to repay Defendants if they wanted to retain ownership of the home.”
The court also found that, based on the circumstances surrounding the transaction, the
parties intended the transaction to be a mortgage. See Hensley v. Britt, No. 01A01-9607-

                                             4
CH-00296, 1996 WL 709375, at *5 (Tenn. Ct. App. Dec. 11, 1996) (listing six factors
relevant to the parties’ intent for an equitable mortgage claim).

       As an equitable mortgage, the court concluded the transaction was subject to TILA.
And, because Defendants did not provide the required TILA and Regulation Z consumer
credit disclosures, Ms. Bradford and Ms. Varallo could still timely rescind the transaction.
See 15 U.S.C. § 1635(a). Based on the pre-suit notice of rescission, the court ordered the
property restored to Ms. Bradford and that she be refunded the rent payments. The court
also awarded her statutory damages of $4,000 plus costs and attorney’s fees. Id. § 1640(a).

       The court dismissed Ms. Bradford’s claim under the Foreclosure-Related Rescue
Services Act. It found that Defendants did not fall within the definition of a “foreclosure-
rescue consultant.” Defendants were “not mak[ing] a ‘solicitation, representation or offer’
in exchange for payment of money.” See Tenn. Code Ann. §47-18-5401(2) (defining a
foreclosure-related consultant). Defendants “simply responded to Ms. Bradford’s inquiry,”
and they “believed they were purchasing the property from Ms. Bradford with the option
for Ms. Varallo to buy it back at a later date.”

       The court also dismissed the usury and TCPA claims. Although the court
determined the effective interest rate on the “debt” was usurious, the court concluded that
the claim was barred under the usury statutes because Ms. Bradford had not paid, or
tendered to the court, the principal plus lawful interest and loan charges due. And the
TCPA did not apply because Ms. Bradford had not acquired any property in the transaction.

       Defendants’ counterclaims, other than their unjust enrichment claim, met the same
fate. The court found that Ms. Bradford had benefited from the payoff of the loan in
foreclosure and the satisfaction of the judgment lien as well as from the payment of
property insurance premiums and taxes over the years. So, by virtue of the rescission of
the transaction, she had been unjustly enriched by those amounts. And Defendants had
improved the home. While the consolidated cases had been pending, Defendants, under
court order, had replaced an HVAC unit in the home. After deducting the rent paid under
the Lease Purchase Agreement as well as the statutory damage award of $4,000, the court
determined that Ms. Bradford owed Defendants $31,798.67. The court ordered her to pay
that amount in satisfaction of her obligations under TILA to tender to the creditor all
proceeds of the loan. See 15 U.S.C. § 1635(b).

       After considering affidavits submitted by counsel, the court awarded Ms. Bradford
attorney’s fees of $103,750. In doing so, it again rejected arguments from Defendants that
attorney’s fees were not recoverable because TILA did not apply to the transaction. The
court also found, over the objections of Defendants, that the fees were reasonable.

                                             5
                                              II.

       Because this was a bench trial, our review is de novo on the record with a
presumption that the trial court’s factual findings are correct, unless the evidence
preponderates against those findings. TENN. R. APP. P. 13(d). Evidence preponderates
against a finding of fact if the evidence “support[s] another finding of fact with greater
convincing effect.” Rawlings v. John Hancock Mut. Life Ins. Co., 78 S.W.3d 291, 296
(Tenn. Ct. App. 2001). We review the trial court’s conclusions of law de novo with no
presumption of correctness. Kaplan v. Bugalla, 188 S.W.3d 632, 635 (Tenn. 2006).

       On appeal, Defendants argue that the transaction was not an equitable mortgage.
Even if it was, they argue, TILA does not apply to equitable mortgages. Of course, Ms.
Bradford and Ms. Varallo disagree. And they raise their own issue. They argue that the
Foreclosure-Related Rescue Services Act applies and that Defendants violated it. And by
violating the Foreclosure-Related Rescue Services Act, Defendants also violated the
TCPA.

        The TILA and equitable mortgage claims both require the existence of a debt. For
an equitable mortgage to exist, there first must be proof “that the grantor was indebted to
the grantee.” Hensley, 1996 WL 709375, at *5. And TILA governs certain consumer
credit transactions. 15 U.S.C. § 1601(a) (Supp. 2019). Under TILA, “[t]he term ‘credit’
means the right granted by a creditor to a debtor to defer payment of debt or to incur debt
and defer its payment.” Id. § 1602(f) (Supp. 2019) (emphasis added). So to resolve the
issues raised by Defendants, we must consider whether there was a debt.

                                              A.

       “Debt” means “[l]iability on a claim.” Debt, BLACK’S LAW DICTIONARY (11th ed.
2019). And there is no liability without an obligation. See Liability, BLACK’S LAW
DICTIONARY (11th ed. 2019) (defining “liability” as “being legally obligated”). So, in
transactions involving a sale and repurchase agreement, “the lack of any binding obligation
on the grantor to pay” the repurchase price “is generally accepted as decisive proof that it
was not meant as a mortgage.” 59 C.J.S. Mortgages § 74, Westlaw (database updated Nov.
2021); see id. § 31.

        Here, the chancery court determined that the option to purchase in the Lease
Purchase Agreement created a debt. Although Ms. Bradford and Ms. Varallo “were not
obligated to repay the [D]efendants in an absolute sense,” the court reasoned, they “were
required to repay the Defendants if they wanted to retain ownership in the home.” See
Perry v. Queen, No. Civ. 3:05-0599, 2006 WL 481666, at *4 (M.D. Tenn. Feb. 27, 2006);
see also In re Cox, 493 F.3d 1336, 1341 (11th Cir. 2007) (applying Georgia law) (reasoning
that the lack of an “express creation of a recourse obligation . . . cannot be the determinative
factor”); accord In re 716 Third Ave. Holding Corp., 340 F.2d 42, 46 (2d Cir. 1964)
                                               6
(applying New York law); Kerfoot v. Kessener, 84 N.E.2d 190, 200 (Ind. 1949); Ministers
Life & Cas. Union v. Franklin Park Towers Corp., 239 N.W.2d 207, 210 (Minn. 1976);
Parrish v. McDaniel, 358 S.W.2d 32, 36 (Mo. 1962); Rice v. Wood, 346 S.E.2d 205, 210
(N.C. Ct. App. 1986); Tuggle v. Berkeley, 43 S.E. 199, 201 (Va. 1903). It was enough that
Ms. Bradford and Ms. Varallo “intended to repay the Defendants once the funds were
available.” We disagree.

       An obligation must be absolute. That is its nature. See Crotzer v. Shawl, 5 Tenn.
App. 240, 245 (1927) (“The very essence of an obligation is its validity and enforcement.”).
For a repurchase agreement to create a debt, then, the grantee must have a remedy against
the grantor. Conway’s Ex’rs v. Alexander, 11 U.S. (7 Cranch) 218, 237 (1812); see Bennet
v. Holt, 10 Tenn. (2 Yer.) 6, 9 (1820) (rejecting an equitable mortgage claim where there
was “no obligation in [the grantor] to repay the money”—he could “not be sued for it, but
[wa]s to advance it at his own will and pleasure”); 59 C.J.S. Mortgages § 73 (explaining
that the debt must “be one that may be enforced in an action at law or by foreclosure
proceedings”); see also 54A AM. JUR. 2D Mortgages § 105, Westlaw (database updated
Nov. 2021). But, as Ms. Bradford and Ms. Varallo conceded at oral argument, Defendants
could not have sued and obtained a judgment for the amount of the purchase price absent
exercise of the option. Ms. Bradford and Ms. Varallo were never obligated to pay the
purchase price to Defendants. They certainly had an incentive to exercise the option, but
they were under no obligation to do so.

        In short, we agree with the authorities that hold that “an option to repurchase is not
an obligation to repurchase.” Johnson v. Washington, 559 F.3d 238, 243 (4th Cir. 2009)
(applying Virginia law); see Charter Gas Engine Co. v. Entrekin, 246 P. 1038, 1040 (Ariz.
1926); Henslee v. Ratliff, 989 S.W.2d 161, 164 (Ark. Ct. App. 1999); Holmberg v. Hardee,
108 So. 211, 220 (Fla. 1925); Tingle v. Tingle, 179 S.E.2d 51, 55 (Ga. 1970); McNamara
v. Culver, 22 Kan. 661, 669 (1879); Sauer v. Fischer, 225 N.W. 518, 519 (Mich. 1929);
Boysun v. Boysun, 368 P.2d 439, 441-42 (Mont. 1962); Sargent v. Hamblin, 260 P.2d 919,
926 (N.M. 1953); Am. Nat’l Bank v. Groft, 229 N.W. 376, 379 (S.D. 1930); Parmenter v.
Kellis, 153 S.W.2d 965, 968 (Tex. Civ. App. 1941); Smyth v. Reed, 78 P. 478, 479 (Utah
1904); Liskey v. Snyder, 49 S.E. 515, 526 (W. Va. 1904); cf. Davis v. Landis, 53 N.E.2d
544, 544 (Ind. App. Ct. 1944) (Because the “note contained an unconditional promise to
pay,” the transaction “could not . . . amount to a conditional sale.”); accord Lerner Shops
of La. v. Reeves, 73 So. 2d 490, 497 (La. Ct. App. 1954). So Ms. Bradford’s and
Ms. Varallo’s option to repurchase did “not constitute a debt between the parties.” See
Johnson, 559 F.3d at 243.

       Because there was no debt, there could not be clear and convincing evidence that
the sale/leaseback transaction was an equitable mortgage.2 See Van Dyke v. Inman, 362

       2
          Where “there is a provision for reconveyance in the deed or by separate contract,” a different
standard other than clear and convincing evidence may apply. See Edwards v. Hunt, 635 S.W.2d 696, 699
                                                   7
S.W.2d 795, 801 (Tenn. Ct. App. 1962) (holding that, to prove that “a deed absolute on its
face . . . was in fact intended to be a mortgage,” the evidence “must be clear, cogent and
convincing, leaving no reasonable doubt as to the real character of the transaction”).
Without a debt, there could also be no claim under TILA. 15 U.S.C. § 1602(f).

                                                   B.

       Ms. Bradford and Ms. Varallo submit that the chancery court erred in concluding
that the Foreclosure-Related Rescue Services Act did not apply. This issue involves
statutory interpretation, which is a question of law that we review de novo. In re Rader
Bonding Co., 592 S.W.3d 852, 858 (Tenn. 2019). When interpreting statutes, our “primary
purpose . . . is to give effect to the legislative intent.” Bidwell ex rel. Bidwell v. Strait, 618
S.W.3d 309, 319 (Tenn. 2021); see Kyle v. Williams, 98 S.W.3d 661, 664 (Tenn. 2003)
(“The duty of this Court in construing statutes is to effectuate legislative intent.”). We
determine legislative intent “primarily from the natural and ordinary meaning of the
language used.” Kyle, 98 S.W.3d at 664. We “presume that the legislature says . . . what
it means and means . . . what it says” in a statute. Gleaves v. Checker Cab Transit Corp.,
15 S.W.3d 799, 803 (Tenn. 2000) (citation omitted). So, when a statute’s language is clear,
“we must apply its plain meaning in its normal and accepted use.” State v. Frazier, 558
S.W.3d 145, 152 (Tenn. 2018) (citation omitted).

       The Foreclosure-Related Rescue Services Act prohibits a “foreclosure-rescue
consultant” from, among other things, “[e]ngag[ing] in or initiat[ing] foreclosure-related
rescue services without first executing a written agreement with the homeowner for
foreclosure-related rescue services.” Tenn. Code Ann. § 47-18-5402(a)(2). A
“foreclosure-rescue consultant” is “a person who directly or indirectly makes a solicitation,
representation or offer to a homeowner to provide or perform . . . foreclosure-related rescue
services” in exchange “for payment of money or other valuable consideration.” Id. § 47-
18-5401(2). And a “foreclosure-related rescue service” is “any service related to or
promising assistance in connection with”:

        (A) Stopping, avoiding or delaying foreclosure proceedings concerning
        residential real property; or

        (B) Curing or otherwise addressing a default or failure to timely pay with
        respect to a residential mortgage loan obligation . . . .

Id. § 47-18-5401(1).

(Tenn. Ct. App. 1982). That is, “evidence of doubtful import will be construed in favor of the theory that
a mortgage was intended.” Id. But that standard only applies if “the grantor remains in possession without
accounting for rents or profits.” Id. Here, although Ms. Bradford and Ms. Varallo remained in possession,
they paid rent.
                                                    8
        We conclude that the Foreclosure-Related Rescue Services Act did apply. When
Ms. Bradford and Ms. Varallo met with Mr. Mulé, they had defaulted on their mortgage.
They were desperate to save their home from foreclosure, which was scheduled for the next
day. After Ms. Bradford and Ms. Varallo explained their situation to Mr. Mulé, Defendants
paid off the loan and a judgment lien in exchange for a deed to the home. In so doing,
Defendants cured the loan default. See id. § 47-18-5401(1)(B). And, as designed, the
transaction stopped the impending foreclosure on the home Ms. Bradford and Ms. Varallo
shared. See id. § 47-18-5401(1)(A). As part of the transaction, Defendants conducted a
title search, checked tax records, contacted lienholders, and structured and documented the
transaction. So Defendants performed services related to both stopping a foreclosure and
curing a default. See id. § 47-18-5401(1).

        Defendants also acted as foreclosure-rescue consultants. On the day Mr. Mulé met
with Ms. Bradford and Ms. Varallo, he represented to them that he and Ms. Mulé,
Mr. Terry, Mr. White, and Ms. Baker would perform foreclosure-related rescue services.
See id. § 47-18-5401(2). He assured Ms. Bradford and Ms. Varallo that there was a way
that they could help with the impending foreclosure. And Ms. Mulé, Mr. Terry, Mr. White,
and Ms. Baker offered to perform foreclosure-related rescue services by agreeing in writing
to purchase Ms. Bradford’s property and to lease it back with an option to purchase. See
id. Significantly, the property they acquired was in foreclosure, and the price they offered
for the property was roughly equal to the amount of the outstanding liens. Also, Mr. Mulé
admitted that the option price was set so that Defendants would turn a profit on the monies
they advanced to stave off the foreclosure, not on the value of the property. And they
received “valuable consideration” by obtaining a deed to the home and rental income under
the Lease Purchase Agreement. See id.

       We also agree with Ms. Bradford and Ms. Varallo that the evidence showed that
Defendants violated the Foreclosure-Related Rescue Services Act. Defendants did not
execute a written agreement for foreclosure-related rescue services with Ms. Bradford and
Ms. Varallo. See id. § 47-18-5402(a)(2). And the agreements executed by the parties did
not contain the provisions required by the Act. See id. § 47-18-5402(b), (d).

                                             C.

       Having concluded that Defendants violated the Foreclosure-Related Rescue
Services Act, the question becomes the appropriateness of the remedy. The chancery court
rescinded the transaction under TILA. But TILA did not apply.

       Even so, under the Foreclosure-Related Rescue Services Act, the transaction was
void. See id. § 47-18-5402(g). Our supreme court has treated “void” and “to set aside” as
interchangeable terms. See Dailey v. S. Heel Co., 785 S.W.2d 344, 347 (Tenn. 1990)
(“Plaintiff did not seek to set aside or void the settlement, but to the contrary, he insisted
                                               9
that the settlement was valid.”). Rescission “involves the avoidance, or setting aside, of a
transaction.” Mills v. Brown, 568 S.W.2d 100, 102 (Tenn. 1978) (emphasis added). Under
the Foreclosure-Related Rescue Services Act, the transaction was also “unenforceable as a
matter of . . . public policy.” Tenn. Code Ann. § 47-18-5402(g). In other words, it was
illegal. See Blackburn & McCune, PLLC v. Pre-Paid Legal Servs., Inc., 398 S.W.3d 630,
651 (Tenn. Ct. App. 2010) (explaining that “the term ‘illegality’ has been replaced by
‘unenforceability on the grounds of public policy’”). Rescission “may be grounded on
illegality in the formation of a contract.” 12A C.J.S. Cancellation of Inst. § 44, Westlaw
(database updated Nov. 2021); see Palmer Bros. v. Havens, 193 S.W.2d 91, 92 (Tenn. Ct.
App. 1945) (reasoning that an illegal agreement may be set aside); 17B C.J.S. Contracts
§ 628, Westlaw (database updated Nov. 2021) (explaining that rescission is appropriate
“where there is original invalidity” or “illegality”); see also 92 C.J.S. Vendor & Purchaser
§ 280, Westlaw (database updated Nov. 2021). So, although TILA was inapplicable,
rescission was a proper remedy. See also 12A C.J.S. Cancellation of Inst. § 1 (“Rescission
is the cancellation of . . . a contract that is . . . void from its inception.”).

        Rescission “amounts to the unmaking of a contract, or an undoing of it from the
beginning.” Walsh v. BA, Inc., 37 S.W.3d 911, 916 (Tenn. Ct. App. 2000) (citation
omitted). It “is intended to return the parties to the positions they were in before the
transaction took place.” Lamons v. Chamberlain, 909 S.W.2d 795, 800 (Tenn. Ct. App.
1993) (citation omitted); see Goodale v. Langenberg, 243 S.W.3d 575, 591 (Tenn. Ct. App.
2007) (explaining that rescission is “designed to restore the parties to the position they
would have occupied had the transaction not occurred”); see also Lindsey-Davis Co. v.
Siskin, 358 S.W.2d 331, 333 (Tenn. 1962) (reasoning that rescission requires placing the
parties “in status quo”). So the parties must “return whatever they received under the
rescinded [transaction].” 12A C.J.S. Cancellation of Inst. § 80; see Lloyd v. Turner, 602
S.W.2d 503, 510 (Tenn. Ct. App. 1980) (“[A] party seeking rescission of a contract must
return . . . that which he has received under it.”). When a real estate contract is rescinded,
the buyer “is entitled to recover the purchase price or other consideration paid for the deed.”
Minton’s Estate v. Markham, 625 S.W.2d 260, 262 (Tenn. 1981). And, usually, the seller
is entitled to an offset for the “reasonable rental value of the premises.” 92 C.J.S. Vendor
& Purchaser § 281. But that is not so where the buyer “never uses or occupies the land.”
Id. § 311. The buyer is also “entitled to reimbursement for the costs of necessary repairs,”
insurance premiums, and taxes paid on the property. 12A C.J.S. Cancellation of Inst. §§
194-95.

       Here, the court restored the property to Ms. Bradford. And it considered the offsets
to which Ms. Bradford and Defendants would be entitled. Defendants paid off liens, paid
property insurance and taxes, and installed a new HVAC unit. For their part, Ms. Bradford3
and Ms. Varallo paid rent to Defendants. But the court also considered a statutory award

        3
         The court credited all rent as if it had been paid by Ms. Bradford. That finding is not challenged
on appeal.
                                                    10
of damages under TILA, which we have concluded does not apply. And, in entering a final
judgment, the chancery court stayed its order pending the outcome of this appeal and
ordered that rent of $500 per month should continue. So we vacate the award of $31,798.67
that the court treated as Ms. Bradford’s “tender” obligation under TILA. See 15 U.S.C. §
1635(b). On remand, the court should determine the amount, if any, necessary to return
the parties to the positions they were in before the sale/leaseback transaction took place.
See Lamons, 909 S.W.2d at 800.

       Finally, the court also awarded attorney’s fees under TILA. We reverse the award
of attorney’s fees under TILA. But we have determined that the evidence preponderates
in favor of a finding that Defendants violated the Foreclosure-Related Rescue Services Act.
As Ms. Bradford points out, a violation of the Foreclosure-Related Rescue Services Act is
a violation of the TCPA. See Tenn. Code Ann. § 47-18-104(b)(44). Under the TCPA, a
court may award a successful plaintiff attorney’s fees. Id. § 47-18-109(e)(1) (Supp. 2021).
So, on remand, the chancery court should also consider whether Ms. Bradford is entitled
to her attorney’s fees under the TCPA.

                                            III.

       The transaction between Ms. Bradford and Defendants was neither an equitable
mortgage nor subject to TILA. But the evidence preponderates in favor of a finding that
Defendants violated the Foreclosure-Related Rescue Services Act. So we affirm the
rescission of the transaction. We reverse the award of statutory damages and attorney’s
fees to Ms. Bradford under TILA. And we vacate the award of the amount intended to
return the parties to the positions they were in before the transaction took place. The case
is remanded for further proceedings consistent with this opinion.

                                                      s/ W. Neal McBrayer
                                                   W. NEAL MCBRAYER, JUDGE

                                            11