Court Opinion

ID: 1047905
Source: CourtListenerOpinion
Date Created: 2013-10-08 02:50:17.079453+00
Date Added: 2024-06-11T12:10:51.910825
License: Public Domain

IN THE COURT OF APPEALS OF TENNESSEE
                            AT KNOXVILLE
                                   May 4, 2011 Session

    SENIOR HOUSING ALTERNATIVES, INC. v. BERNARD GLOBAL
                   LOAN INVESTORS, LTD.

                 Appeal from the Chancery Court for Hamilton County
                   No. 09-1065    W. Frank Brown, III, Chancellor

                 No. E2010-01964-COA-R3-CV-FILED-JUNE 28, 2011

Senior Housing Alternatives, Inc. (“the Borrower”) filed this action against Bernard Global
Loan Investors, Ltd. (“the Secured Party”) asking the trial court to enjoin the Secured Party
from foreclosing on a deed of trust that secured several notes on which the Borrower had
defaulted. In essence, the Borrower’s complaint alleges that its original lender had defrauded
the Borrower and inflated the balance owed on the notes and that the Secured Party had
knowledge of the fraud when it took ownership of the notes and deed of trust. The complaint
alleges that the merits of the case are at issue in a federal district court in Georgia. Despite
expressing reservations about the Borrower’s ability to prevail on the merits, the trial court
granted it a temporary injunction to preserve the status quo in an order entered February 15,
2010. The court noted that developments in the federal court action could affect the equities
and set a hearing for August 13, 2010, to “review the entire matter.” Two days before the
hearing date, the Secured Party filed a brief, with supporting affidavits, asking the court to
dissolve the injunction. The court heard proof at a status conference and thereafter issued
a memorandum opinion explaining that it was dissolving the injunction because, among other
things, the court did not believe the Borrower could prevail on the merits. The Borrower
appeals from the order dissolving the injunction and dismissing the complaint. We affirm.

       Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court
                             Affirmed; Case Remanded

C HARLES D. S USANO, J R., J., delivered the opinion of the Court, in which D. M ICHAEL
S WINEY and J OHN W. M CC LARTY, JJ., joined.

David R. Evans, Chattanooga, Tennessee, for the appellant, Senior Housing Alternatives, Inc.

Bruce C. Bailey, Chattanooga, Tennessee, and David A. Rabin, Atlanta, Georgia, for the
appellee, Bernard Global Loan Investors, Ltd.
                                         OPINION

                                              I.

                                             A.

       The Borrower is in the business of furnishing innovative housing for senior citizens.
The Borrower’s system is innovative in that it offers the residents a wide range of services,
including meals , and focuses on rehabilitation of the residents rather than just making them
comfortable. The system has shown promise. The Borrower’s facilities (“the Facilities”) are
located at 825 Runyan Drive, Chattanooga. The Facilities include 140 residential units plus
recreational areas, kitchens, dining rooms and therapy rooms, situated on approximately six
acres of land.

        Funding for the project, including the purchase of the real property and renovation of
the Facilities, was provided by Cornerstone Ministries Investments, Inc. The original lending
documents dated on or about June 30, 2003, consisted of a “Secured Real Estate Note” in
the amount of $5,000,000, a “Closing Statement” that listed money advanced totaling
$2,951,436.80, a “Tennessee Deed of Trust and Security Agreement,” and an “Absolute
Assignment of Leases, Rents, and Profits.” The difference between the $5,000,000 note and
the money advanced at closing – approximately $2,000,000 – was to be paid to the Borrower
in draws as needed in the manner of a line of credit. After using the full line of credit, the
Borrower executed two additional notes, the first in the amount of $1,000,000 and the second
in the amount of $214,001. Cornerstone, the Borrower, and the trustee on the deed of trust
executed “amendatory” agreements, the result of which was to secure all advances by way
of the deed of trust and the assignment of rents. The amendatory agreements all included the
following language:

              [The Borrower] hereby (i) ratifies and affirms all of its
              obligations under the Note . . . and Loan Documents as modified
              and amended hereby; (ii) acknowledges, represents and
              warrants that the Note, . . . the Deed of Trust and Security
              Agreement and the Loan Documents constitute valid and
              enforceable obligations of [the Borrower] as of this date, free
              from any defenses and claims of offset by [the Borrower]; and
              (iii) consents to the modification and amendment of the Note,
              . . . the Deed of Trust and Security Agreement and Loan
              Documents as set forth herein . . . .

(Emphasis added.) The third amendatory agreement also extended the maturity date of the

                                             -2-
notes to July 1, 2009. The third amendment was executed on or about February 1, 2007.
Interestingly, the notes, by their express terms, are governed by Georgia law, whereas the
deed of trust and assignment of rents are, by their express terms, governed by Tennessee
Law.

       In the time frame of July to October 2006, the Borrower’s auditor began to question
some of the expenses charged by Cornerstone as draws against the line of credit. The
auditor’s questions prompted the Borrower to ask Cornerstone for an accounting of the
charges against the line of credit. The Borrower was “shocked” to learn that some of the
charges were payments to the Borrower’s then-president, a man named Taylor McGown.
Cornerstone advised that the charges were a “mistake” that would be corrected. Thus, the
Borrower signed the third amendment confirming the debt, including the waiver of defenses
and claims of offset, with knowledge of this “mistake.”

       Through a series of transactions which need not be described in detail, the Secured
Party obtained an assignment of the various lending documents as security on a loan, the
proceeds of which ultimately went to Cornerstone. Cornerstone filed bankruptcy in February
2008. Through Cornerstone’s default, the Secured Party obtained ownership of the notes and
related documentation in a foreclosure sale in November of 2008.

        In February 2009, the Secured Party filed an action against the Borrower in the United
States District Court for the Northern District of Georgia (“the federal action”). The thrust
of the federal action was an action to collect the unpaid balance of the notes executed by the
Borrower. The Borrower filed an answer and counterclaim raising the alleged fraud of
Cornerstone as a defense and cause of action against the Secured Party. The Borrower asked
for punitive damages in the federal action.

       It is significant that the Borrower does not seek a determination in the present action
of the merits of its claims or defenses asserted in the federal action. The Borrower states at
page three of its brief the relationship between the federal action and this action:

              To promote judicial economy and to avoid parallel proceedings
              covering the same facts, the thrust of [the Borrower]’s action
              below was to maintain the status quo and to then utilize the
              Federal Litigation to hopefully resolve any contested questions
              of fact or law, allowing the [Chancery] Court to then utilize
              principles of collateral estoppel, to the maximum extent
              permitted, to resolve the action in [Chancery] Court . . . by the
              entry of appropriate orders following the conclusion of the
              Federal Litigation.

                                             -3-
(Footnote omitted.)

       The Borrower claims in this action that the fraud is so pervasive that it cannot be
detailed, but offers the following specific “examples” of the fraud practiced by Cornerstone:

       1. R.E.E.D. Services, LLC was formed just days before the closing of the Borrower’s
loan. It is owned by one of the sons of Cornerstone’s second in command, Jack Ottinger.
One of the charges against the Borrower’s line of credit is a $250,000 invoice from R.E.E.D.
The invoice is for “acquisition services” however it was not included in the closing
statement. Ottinger approved the invoice for payment and instructed that it be charged to the
Borrower. At the meeting of creditors in Cornerstone’s bankruptcy, Ottinger first stated that
the charge was a simple mistake. When confronted, Ottinger admitted that the charge was
made up because he and others in Cornerstone wanted the money.

        2. Taylor McGown, the officer of the Borrower, received payments from Cornerstone
totaling $220,750 that were charged to the Borrower’s line of credit. As related above,
Cornerstone’s position when the payments to McGown were questioned was that they were
a simple mistake. Cornerstone’s chief internal accountant, Timothy Turner, has supplied an
affidavit stating that all of the McGown payments were made with full knowledge of and at
the direction of Cornerstone’s management team.

       3. The Borrower was charged $80,339.94 for out of pocket closing costs. The
Borrower has determined that approximately $60,000 of the charges are totally unrelated to
the Borrower or its credit line. Additionally, Cornerstone charged the Borrower a $500,000
closing fee. The Borrower concedes that the closing fee was “plainly disclosed” on the
closing statement, but argues that it helped to cover up the other improper fees that were not
disclosed.

         4. The Borrower is being charged 10% interest on the Cornerstone line of credit. In
2006 the Borrower attempted to secure financing with National Cooperative Bank (“NCB”)
at a rate of approximately 6.5%. The Borrower claims that Cornerstone intentionally blocked
the better financing package in two ways. It inflated the balance due on the loan to the point
that NCB would not extend financing and it refused to subordinate its first lien and carry a
small second mortgage. The Borrower claims this would have made a difference of
approximately $1 million.

       In addition to all of this, the Borrower alleges in the present action that the charges
against the line of credit were not supported by proper documentation such as would allow
the Borrower to determine whether or not the charges were legitimate. The Borrower alleges

                                             -4-
that the Secured Party agreed to provide an accounting to be performed by “Ernst & Young,
a nationally recognized accounting firm.” However, at the time the complaint in the present
action was filed, the Secured Party claimed that the Ernst & Young report was privileged.
Nevertheless, by the time of the status conference, the Secured Party had relented and
supplied the Borrower a copy of the Ernst & Young report.

        The Secured Party, for the most part, has not defended Cornerstone’s actions. Its
position is that Cornerstone’s bad acts cannot give rise to liability or defenses with respect
to the Secured Party. After the February hearing and before the August status conference,
the Secured Party filed a motion for summary judgment in the federal action. As part of its
filing, the Secured Party disclaimed any right to recover the proceeds of Cornerstone’s
alleged fraud. According to the Secured Party’s brief filed in the federal action, which was
introduced in the chancery court by affidavit,

              [the Secured Party] is now dropping all but one of those
              [disputed] charges and any associated interest on them from the
              debt and is suing only for the balance. [The disputed charge that
              the Secured Party retained is the $500,000 closing fee that was
              plainly displayed on the closing statement.] In taking this step,
              [the Secured Party] does not admit that those charges were
              improper. [The Secured Party] believes that those charges can
              legally be charged against the loan account. Nevertheless, [the
              Secured Party] believes that continued litigation over these
              charges is not worth the associated time, trouble and expense.

According to an affidavit filed in support of lifting the preliminary injunction, the balance
owed after eliminating all of the challenged charges and associated interest, is approximately
$6.5 million. Attorney’s fees claimed by the Secured Party bring the total chargeable to the
collateral to approximately $7 million.

       In December 2009, Bruce C. Bailey, as substitute trustee on the deed of trust, gave
notice of a foreclosure sale scheduled for January 11, 2010. The Borrower then filed the
present action to enjoin the sale. The complaint names the Secured Party as well as the
substitute trustee as defendants. The trustee was dismissed as a party upon agreeing to be
bound by the court’s orders and is not a party to this appeal. The complaint alleges that
“[t]he debt claimed by [the Secured Party] in the Federal Litigation includes amounts that
[the Secured Party] knew or had reason to know were fraudulently and improperly charged
to the Loan Account by Cornerstone.” The Borrower’s position in the federal action, as
explained in the complaint in this present action, is as follows:

                                             -5-
               In the Federal Litigation, [the Borrower] seeks recoupment,
               setoff, damages and punitive damages as a result of the
               deceptive and fraudulent acts and omissions of Cornerstone and
               [the Secured Party’s] continuation and furtherance of the fraud.
               [The Borrower] has asserted counterclaims in the Federal
               Litigation of breach of contract, fraud, setoff and recoupment,
               attorney’s fees, and punitive damages. [The Borrower] has also
               asserted affirmative defenses in the Federal litigation, including,
               inter alia, that Cornerstone and [the Secured Party] are guilty of
               unclean hands which render the debt . . . and the related Loan
               Documents invalid and unenforceable.

The complaint demands temporary and permanent injunctive relief “from foreclosure and
sale of [the Facilities]” and asks that the court retain jurisdiction over the defendants to “enter
such orders and relief as may be warranted to clear title to the [p]roperty from any liens and
encumbrances” as may be “appropriate upon the conclusion of the Federal Litigation.”

                                                B.

      As we have indicated, the trial court granted a temporary injunction. It explained its
reasons in a memorandum opinion.

               Three of the four factors that normally are considered by the
               Court to determine whether to grant a temporary injunction or
               not favor the Plaintiff, [the Borrower].

               One. Obviously, if the foreclosure occurs, there is irreparable
               harm to the [Borrower]. They’re out of business. They lose
               their one entity that produces income.

               Two. The balance of the harm to the [Borrower] if no
               injunction is granted is greater than the harm that would befall
               the [Secured Party] if the injunction is granted. However, the
               Court believes that this balancing test is more equalized with the
               bond that will be discussed later.

               The third factor favoring the [Borrower] obtaining a temporary
               injunction is the public interest. It certainly is in the public
               interest that one’s debts are paid and that one cannot have his or
               her cake without paying for it.

                                                -6-
It’s also in the public interest that we try to take care of the
residents at [the Facilities]. And the Court notes the testimony
by I believe it’s Mr. Peterson, saying that [the Secured Party]
would try to do that. I think, at this point in time, that factor does
favor the [Borrower].

The fourth factor is the probability that the [Borrower] will
succeed on the merits. However, we can describe that as a
mixed bag. . . . .

The Court believes that the [Borrower] may be able to prove
some fraudulent transactions by Cornerstone and that [the
Borrower] may prove that some payments were not credited to
the account properly and that there may be credits for interest
paid when these deductions are taken off the account.

However, the Court believes that, based upon the present record,
that [the Borrower] will have some difficulty in prevailing on
the ultimate issues in this case. There are questions of whether
or not the [Borrower] justifiably relied upon certain actions
and/or statements by Cornerstone. The [Secured Party] referred
to the [Borrower’s], quote, blind reliance, which has not been
found to be justifiable under Georgia law.

The five-hundred-thousand-dollar origination fee, which is
attacked by the [Borrower], was, as the Court understands it, set
forth on the original settlement sheet, for all to observe at the
closing. [The Borrower] often did whatever Cornerstone asked,
evidently without inquiry or question.

In the Court’s mind, there is the bigger question regarding the
present holder, [the Secured Party]. [The Borrower] would
apparently owe approximately six million dollars, even if all of
the credits and the monthly compound interest were found to be
in [the Borrower’s] column at the end of the litigation.

[The Borrower]’s request is somewhat tainted, in that there have
been no payments whatever made on the note by [the Borrower]
since September 30, 2008. That was the last payment made on

                                 -7-
              the account, according to Mr. Crowe’s affidavit and
              attachments.

              [The Secured Party] obtained this note in October 2008 as a
              result of a foreclosure it pursued when the money owed it was
              not paid. Thus, this Court has great doubt that, at the end of the
              federal litigation, [the Borrower] will prevail in having punitive
              damages awarded against [the Secured Party] and that the
              amount of any punitive damages or other credits would wipe out
              this five- to six-plus-million-dollar balance.

                                          *   *     *

              So it’s this Court’s position that, on the present record, [the
              Borrower] will owe [the Secured Party] considerable monies at
              the end of the federal court litigation. I’m not a prophet. I’m
              just having to make that decision based on the request for
              temporary injunction.

              However, despite the concerns of the Court about [the
              Borrower] prevailing completely – when I say completely,
              enough to eliminate the total debt owed [the Secured Party]– the
              Court also knows that injunctions are often used to preserve
              temporarily the status quo and to give people an opportunity to
              litigate issues.

              The issue on how much [the Borrower] owes and what credits
              and deductions, if any, it’s entitled to under the balance due
              claimed by [the Secured Party] will be decided by the United
              States District Court in the Northern District of Georgia and not
              here. Therefore, the Court has decided to allow a temporary
              injunction to be issued in this case.

                                              C.

        After the August hearing, the court explained its reasons for dissolving the injunction
as follows:

              The issue before the Court today is whether the Court should
              legally place the temporary injunction, should modify the

                                              -8-
temporary injunction, or should dissolve the temporary
injunction.

                            *   *     *

. . . [T]here have been developments since the hearing held
herein on February 29, 2010. First, [the Secured Party] has
turned over to [the Borrower]’s attorneys the Ernst & Young
report. Second, the discovery period in federal court has ended.
The result of these two facts is that [the Borrower] has no
evidence that [the Secured Party] has been guilty of any
participation in or wrongdoing with regard to the . . . debt.

The Court sees no evidence that [the Secured Party] itself has
unclean hands. [The Secured Party] has done nothing, to this
Court’s knowledge, that would present any basis for [the
Borrower] to obtain a punitive damage award against [the
Secured Party].

The third development is that [the Secured Party] has agreed to
waive any claims to the portion of the debt that [the Borrower]
claims was wrongful. In addition, [the Secured Party] has given
credit for all payments [the Borrower] claims it has made to
Cornerstone even though such may not have been shown as
credits on the Cornerstone records.

The only item not dropped or waived was the original $500,000
origination fee for the loan and line of credit. Origination fees
are typically charged in many loan transactions and the charge
is clearly set forth in the closing or settlement statement, which
was signed by an officer of [the Borrower].

The sum and substance of the testimony received on August 13,
2010, is as follows: First, Mr. Gould said his group would
employ Beacon Communities to manage [the Facilities] if the
foreclosure is allowed to go forward and [the Secured Party] is
a successful or high bidder.

Second, Mr. Johnson testified that Beacon Communities was
ready, willing, and able to step in and manage [the Facilities] if

                                -9-
and when [the Secured Party] became the owner of the
organization. Beacon Communities has had some experience in
managing companies under such situations when management
has changed.

Third, Ms. Reynolds is a certified appraiser. She appraised the
value of [the Facilities] at $7.8 million as of April 1, 2010. This
appraisal was based upon the year-end statements for [the
Borrower] of 2007, 2008, and 2009.

Subsequently, Ms. Reynolds appraised the value of [the
Facilities] at $6.5 million as of June 1, 2010. This appraisal was
based upon the 2008, 2009, and the first quarter of 2010. The
decline in value was due to decreased net operating income, due
to decreased rental income, and increased medical costs. Ms.
Reynolds admitted that the first . . . quarter of the year is often
the worst quarter in the year.

Based on the affidavit submitted by Keith Caldwell, [the
Secured Party]’s claim as sanitized is as follows: $5,440,000 and
$177. Interest through July 15, 2010, $1,213,599. And [the
Secured Party] is claiming attorney’s fees under Georgia law of
$665,402.60. In addition, the per diem interest is $1,490.46.

[The Secured Party] points out that [it] has been damaged by the
granting of the temporary injunction because the value of the
collateral has declined and because [the Secured Party] has not
received any payments from [the Borrower]. Indeed, [the
Secured Party] points out that the payments that the [the
Borrower] has paid to the Clerk & Master for the injunction
bond are less than the accrued interest per month that is
accumulating on the debt.

Everyone talks about the four factors considered by federal
courts in granting temporary injunctions or in continuing them.
In addition to those factors, often the temporary injunction is
granted to maintain the status quo of the situation. Sometimes
temporary injunctions are granted to let the smoke clear and the
true picture to become clearly focused. Sometimes other

                               -10-
litigation may decide issues, save duplication of effort and make
lawsuits moot.

                             *    *     *

I do not think there is a substantial likelihood of [the Borrower]
prevailing on the merits in the Georgia litigation. One, [the
Borrower] cannot show fraud by [the Secured Party] or its
participation in any fraud or wrongful conduct. [The Secured
Party] has eliminated the disputed charges which the Court
would, if found to be true, eliminate. This reminds me of the
claim of [the Borrower] in its counterclaim of setoff and
recoupment, and in effect [the Secured Party] has done that.

. . . . Whether Georgia law or Tennessee law applies, the Court
does not believe that [the Borrower] will be able to obtain a
punitive damage award against [the Secured Party].

[The Borrower has] not paid very much at all to Cornerstone
Ministries and nothing to [the Secured Party]. I think, if I am
correct, that the last payment on the note was made in April of
‘08, which is well over two years ago.

                             *    *     *

If the Court’s math is right, . . . the total payments barely exceed
the principal sum that was granted to [the Borrower] on the first
day in the approximate amount of $2,000,000.

Secondly, the Court does not find that the harm to [the
Borrower] will be irreparable. Number one, [the Secured Party]
has taken steps to bring in a management firm to manage [the
Facilities] if [the Secured Party] is successful in its foreclosure
and is the high bidder. Top management would lose their
positions and salary, which such often occurs where businesses
fail financially. The residents will be cared for by [the Secured
Party] and Beacon Communities, Inc., if [the Secured Party] is
the high bidder.

                                 -11-
Also, the Court will note that [the Borrower] has a monetary
claim or a remedy against [the Secured Party] in the litigation in
Rome, Georgia.

The Court – third, the Court does not find the potential harm to
[the Borrower] exceeds the harm to [the Secured Party]. The
Court was concerned about this and some other factors in
February. That matter has been resolved in view of [the Secured
Party]’s reduction of its claim and the appearance of Mr.
Johnston and his testimony. [The] debt is ever increasing and the
[Borrower]’s payment[s] to the Clerk & Master are less than the
accrued interest.

The fourth factor is the public policy factor, and to some extent
this tied into the patient-care issue. That issue is now no longer
a factor in view of Mr. Johnston’s testimony.

Certainly, and at least until perhaps recently, some people may
say, there was a strong public policy that persons who borrowed
money should repay the loan. It’s not right for [the Borrower]
to have gone almost two and a half years without paying any
payment on the loans to [the Secured Party] and its predecessor.

                            *    *     *

So basically, even though I had some reservations in February,
I had some reservations regarding the patient care, I had some
reservations about the disputed charges, those matters have been
resolved in the Court’s mind.

Most important with regard to the Ernst & Young report and the
discovery, that apparently has shown that [the Secured Party]
was not knowledgeable of any fraud on behalf of Cornerstone.

Based on the evidence that has now become clear, the Court
hereby orders that the temporary injunction issued February 15,
2010, is dissolved. The Court wants to make that a final order
and order that [the Borrower] may elect to consider an appeal,
if it wants to do that, and for that purpose the Court would in

                                -12-
              effect say that this is the final order, that there is no reason not
              to make that a final order for appeal.

Thus, the court entered an order dissolving the injunction and dismissing the complaint. The
Borrowed filed a timely notice of appeal.

        The Borrower filed a motion with the trial court asking it to stay the effect of its
judgment pending appeal. The trial court entered an order granting the stay conditioned upon
the Borrower posting a bond in the amount of $1,275,000. The Borrower filed a motion
asking this court to reduce the bond. We declined. The Borrower then filed bankruptcy.
Upon receiving notice of the bankruptcy, we filed an order allowing the case to proceed. At
oral argument, both parties agreed that the bankruptcy does not prevent this case from going
forward to final judgment. Nevertheless, foreclosure is presently stayed by the bankruptcy
regardless of the our holdings in this case.

                                              II.

       We agree with the Secured Party that the dispositive issue is whether the trial court
abused its discretion in dissolving the temporary injunction that it had previously granted.
Nevertheless, it will be helpful for discussion purposes to list verbatim the issues as stated
by the Borrower:

              What is the appropriate standard of review on appeal?

              Whether the Lower Court erred by dissolving the stay and ruling
              that [the Borrower] did satisfy the requirements for a stay?

              Whether [the Secured Party] is a holder-in-due-course of a
              negotiable instrument?

              Whether the [Secured Party]’s right to non-judicial foreclosure
              was barred by applicable Tennessee law?

              Whether the Notes sought to be enforced by the [Secured Party]
              . . . are enforceable?

              Whether the Lower Court erred by failing to apply Tennessee
              law to the Deed of Trust at issue herein?

                                             -13-
              Whether the Lower Court erred in determining that there were
              changes in the facts of applicable law which warranted
              dissolution of the previously issued stay?

              If this Court reinstates the stay on appeal, should more than a
              nominal bond be required?

(Paragraph numbering omitted.)

                                              III.

        Despite the Borrower’s contentions to the contrary, there can be no doubt that a trial
court’s decision granting or denying injunctive relief is reviewed for abuse of discretion.
Gentry v. McCain, 329 S.W.3d 786, 793 (Tenn. Ct. App. 2010). Under this deferential
standard, a trial court's ruling “will be upheld so long as reasonable minds can disagree as
to [the] propriety of the decision made.” Id. (quoting Eldridge v. Eldridge, 42 S.W.3d 82,
85 (Tenn. 2001) (citations omitted, brackets in original). Further,

              [a] trial court's discretionary decision must take into account
              applicable law and be consistent with the facts before the court.
              When reviewing a discretionary decision by the trial court, the
              “appellate courts should begin with the presumption that the
              decision is correct and should review the evidence in the light
              most favorable to the decision.”

Id. (quoting DeLapp v. Pratt, 152 S.W.3d 530, 538 (Tenn. Ct. App. 2004)).

              The most common description of the standard for preliminary
              injunction in federal and state courts is a four-factor test: (1) the
              threat of irreparable harm to plaintiff if the injunction is not
              granted; (2) the balance between this harm and the injury that
              granting the injunction would inflict on the defendant; (3) the
              probability that plaintiff will succeed on the merits; and (4) the
              public interest.

Id. (quoting Robert Banks, Jr. & June F. Entman, Tennessee Civil Procedure § 4–3( l )
(1999)).

                                              -14-
                                               IV.

        With these pronouncements behind us, we will briefly address the Borrower’s
mistaken contention that the de novo standard of review is the proper standard for this case.
The Borrower ties its position to the trial court’s dismissal of the complaint, and cites
opinions which discuss dismissals of cases as a matter of law. See Marceaux v. Thompson,
212 S.W.3d 263, 266 (Tenn. Ct. App. 2006)(dismissal for failure to state a claim is reviewed
de novo); Blair v. West Town Mall, 130 S.W.3d 761, 763(Tenn. 2004)(summary judgment
is reviewed de novo as a question of law). The critical difference between those cases and
the present case is that the only substantive relief sought in the present case is injunctive
relief whereas the cited cases sought other forms of relief. If the trial court correctly
exercised its discretion in denying injunctive relief, the only substantive relief sought, there
could be no error of law in dismissing the complaint.

       We are aware that the complaint also asks the court to retain jurisdiction to enter such
orders as may be appropriate upon termination of the federal action, but we do not consider
that request to be ripe for a decision so as to state an actionable claim regarding a live
controversy. See City of Memphis v. Shelby County Election Commission, 146 S.W.3d 531,
539 (Tenn. 2004). Issues which are based on contingencies which may or may not happen
are not ripe for adjudication. Id. The Borrower has furnished no reason to believe that the
Secured Party will not follow the rulings of the federal court and agree to whatever relief is
required by its orders. The need for further orders to enforce the judgment rendered in the
federal action is, at most, a contingent possibility. The gravamen of this present action is an
action for injunctive relief. Therefore, we hold that the appropriate standard of review is
abuse of discretion.

         The Borrower’s second and seventh issues strike at the heart and soul of the case. The
Borrower’s “take” on these issues is that the trial court correctly granted an injunction in
February and that it erred in dissolving the injunction in August. We disagree, at least on the
latter point. One problem with this argument is that it ignores the discretion of the trial court.
By the very definition of our standard of review, if the trial court takes into account
applicable law “consistent with the facts before the court,” its decision will be upheld even
if “reasonable judicial minds can differ” as to the outcome. Gentry, 329 S.W.3d at 793
(quoting DeLapp, 152 S.W.3d at 538). There is certainly enough leeway in this discretionary
standard for a trial judge to be lenient in favor of granting an injunction in the context of an
initial hearing when not much is known about the ultimate merits of the case, and then taking
a harder look at the merits as more becomes known. That is exactly what happened in the
present case. It is apparent that the trial court had strong doubts about the merits of the
Borrower’s position from the outset, but exercised its discretion in a way that gave the

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Borrower an opportunity to either save its Facilities by securing financing or developing
proof of fraud imputable to the Secured Party. It did neither.

        A second problem with the Borrower’s position is that it ignores the proof that shifts
the “public interest” factor in favor of the Secured Party. There can be no doubt that the
public has an interest in seeing that loans are repaid. Our entire system of free enterprise is
built on this principle. Bankruptcy is an exception we live with and not the rule. Also, the
trial court expressly found that the residents of the Facilities will continue to be served in the
event of a foreclosure because the Secured Party intends to purchase the Facilities in
foreclosure and hire a management company with experience in the field of senior care. This
finding turns, at least in part, on witness credibility and is entitled to great deference. See
Jones v. Garrett, 92 S.W.3d 835, 838 (Tenn. 2002). Findings which turn on credibility will
not be reversed “absent clear and convincing evidence to the contrary.” Id.

        Further, any harm to the Borrower is the subject of damage claims in the federal action
as the trial court observed. Where there is a full, complete, and adequate remedy at law for
a wrong, such as damages, the harm therefrom is not irreparable. Fort v. Dixie Oil Co., 95
S.W.2d 931, 932 (Tenn. 1936).

       Finally, the Borrower’s position ignores some very sound reasoning by the trial court
with regard to the probability of the Borrower prevailing on the merits of the case. The most
that can be said as to the “wrongdoing” of the Secured Party is that when it purchased the
notes from Cornerstone’s assignee, it knew that Cornerstone had defrauded the Borrower.
The Secured Party has now disclaimed in the federal action any right to recover money from
the Borrower that accrues from the wrongdoing. Still, after subtracting the ill-gotten gains,
the Borrower owes approximately $7 million on a property that was most recently appraised
at approximately $6.5 million. Thus, in order to prevail on its monetary claims, the Borrower
must convince a trier of fact to award it $7 million in punitive and compensatory damages
on a compensatory claim that is at most in the range of $2 million. Experience and reason
teaches that such a recovery is not “likely” in a case where the real culprit is not the
defendant, here the Secured Party.

        One of the Borrower’s arguments is that Cornerstone’s fraud “vitiates” the contract.
Even if that is true, at most it would give the Borrower the choice of rescinding the deal or
recovering damages. Isaacs v. Bokor, 566 S.W.2d 532, 537 (Tenn. 1978)(victim of
misrepresentation may not both affirm the contract and keep all its benefits and disaffirm).
We have already discussed the outcome if the Borrower elects the remedy of damages. If the
Borrower elects recission of the contract, then the goal becomes to restore the parties to the
positions they were in before the contract, as if it never existed. Id. at 540. Therefore, even
if the Borrower pleads and pursues the remedy of recission in the federal action, which the

                                              -16-
Secured Party represents it has not done, it must restore the moneys that it received as a
benefit of the contract. Id. at 540. This takes us back to the same point that we were at
before; namely that the Borrower has received approximately $6.5 million, upon which has
accrued interest, most of which it will more than likely owe to the Secured Party at the end
of the day.

        Another way that the Borrower argues it can prevail is through its unclean hands
defense. The Borrower argues, as we understand its brief, that the Secured Party is not a
“holder in due course” of the notes; that the federal court in Georgia will apply Tennessee
law despite the explicit choice of law provision in the notes; that a statute recently enacted
in Tennessee will give the Borrower an unclean hands defense 1 ; and that the unclean hands
defense will apply to the Secured Party just as it would apply to Cornerstone because the
Secured Party stands in Cornerstone’s shoes. One problem with this argument is that the
Borrower told the trial court in its complaint that it wants the merits determined in the federal
action and now faults the trial court for not weaving its way through a series of detailed
findings of fact and law to reach the conclusion that the Borrower will prevail. The case was
not in a posture before the trial court, or before this court, for such detailed findings. What
the trial court was charged with determining at this stage was the Borrower’s likelihood of
success. It concluded, correctly in our opinion, that the Borrower faces a long up-hill climb
and that ultimately it will not be successful in eliminating the debt or asserting a successful
and complete defense against foreclosure.

      We can easily affirm the trial court’s findings without exhaustively discussing each
and every argument advanced by the Borrower. Unless the Borrower can successfully assert

        1
          The Borrower relies on Tenn. Code Ann. § 16-1-203 (Supp. 2010). The language, in pertinent part,
is as follows:

                If any person, or such person's predecessor-in-interest from whom the claim
                has derived, is found by the applicable trier of the fact in any court of
                competent jurisdiction to have unclean hands with respect to any claim,
                then such claim shall not be enforceable in such court, or any other court,
                unless the holder of such claim is a holder in due course of a negotiable
                instrument . . . .

Section 203 is part of the codification of the “equitable and common law defense of unclean hands.” Tenn.
Code Ann. § 16-1-201. A court “may” grant injunctive relief “in accordance with . . . applicable procedural
rules and requirements . . . to maintain the status quo pending” determination of the merits of the unclean
hands defense. Tenn. Code Ann. § 16-1-205 (emphasis added).

                                                   -17-
the unclean hands defense as a complete defense against payment of the loan and foreclosure
under the deed of trust, then it will not prevail. Under Georgia law, which by the explicit
terms of the note is to be applied to any dispute concerning the note, “[t]he equitable doctrine
of unclean hands . . . has no application to an action at law.” Park v. Fortune Partner, Inc.,
279 Ga. App. 268, 630 S.E.2d 871, 877 (2006)(omission in original). Park is consistent with
the trial court’s findings.

        Even if the Borrower is successful in convincing the federal court to apply Tennessee
law, there are limitations in Tennessee law upon application of the defense. In Terrell v.
Terrell, 292 S.W.2d 179 (Tenn. 1956), the Court held that the fraud of grantee L.L. Terrell
in a deed to Lucy Terrell could not be asserted as a defense by Lucy against her grantee
Johnny because Johnny was “innocent of any wrong in the original transaction.” 292 S.W.2d
at 184. The trial court found that there is no proof before him that the Secured Party is guilty
of fraud in the original transaction. We do not understand the Borrower to be challenging
that finding; the Borrower is trying to avoid it by putting the Secured Party in Cornerstone’s
shoes.

       Finally, even it the Borrower is successful in arguing that Tennessee substantive law
applies to the determination of the amount owed on the note, and even if the Borrower is
successful in arguing that the Secured Party can be subject to the defense based on the
unclean hands of its grantee, the Borrower does not win automatically. “Decisions regarding
the proper application of the doctrine of unclean hands are heavily fact-dependent and are
addressed to the considerable discretion of the trial court.” Coleman Management, Inc. v
Meyer, 304 S.W.3d 340, 353 (Tenn. Ct. App. 2009). One factor that should weigh in the
court’s exercise of its discretion is whether the person who is pointing to the unclean hands
of an opponent also has unclean hands. He who seeks equity must do equity. Dodson v.
Shrader, 824 S.W.2d 545, 547 (Tenn. 1992). The trial court correctly pointed out in its
findings in this case that “[i]t’s not right for [the Borrower] to have gone almost two and a
half years without paying any payment on the loans to [the Secured Party] . . .”

        In summary, we find no error in the trial court’s finding that the Borrower is unlikely
to prevail at the end of the day. Also, we find no error in the trial court’s finding that it is
unlikely that foreclosure will work more harm on the Borrower than enjoining foreclosure
would work on the Secured Party. There is also no error in the finding that foreclosure will
not be against the public interest. We have considered all the Borrower’s arguments to the
contrary, including those we have not discussed in detail although listed in the issues, and
find them to be without merit. The determinative issue is whether the trial court abused its
discretion in dissolving the injunction. We have held that it did not. We have also held that
the claim for injunctive relief is the only substantive claim ripe for adjudication. Because we

                                              -18-
have found no error in dissolving the injunction, we need not reach the issue of what should
be the terms of a bond posted upon continuation of the injunction.

                                              V.

       The judgment of the trial court is affirmed. Costs on appeal are taxed to the appellant,
Senior Housing Alternatives, Inc. This case is remanded, pursuant to applicable law for
collection of costs assessed by the trial court.

                                                    _______________________________
                                                    CHARLES D. SUSANO, JR., JUDGE

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