IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF TENNESSEE

JOSHUA WAYNE PERRY

Plaintiff
vs.
SEAN QUEEN,
DAWN LENIGER,
CAPPS DRIVE TRUST,
and
ROYALTY PROPERTIES, LLC
A Tennessee corporation
Defendants

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Case No. 3:05-cv-0599

Judge Trauger
Magistrate Judge Brown

JURY DEMAND

FIRST AMENDED COMPLAINT

PRELIMINARY STATEMENT
1. Mr. Perry is a low-income homeowner who unknowingly transferred title to
Defendants of the home he has lived in for over 28 years. Mr. Perry thought he
was getting a mortgage loan from Defendants to refinance the two existing
mortgages on his home. Instead, he lost title to his property and became a tenant
in his own house with the option to repurchase his home within one year of the
date that he signed a Warranty Deed. Mr. Perry seeks a declaration from this
Court that Defendants have an equitable mortgage and that the Warranty Deed
signed by Mr. Perry is void; that Defendants committed fraud; that the Defendants
engaged in unfair and deceptive acts and practices pursuant to the Tennessee

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Consumer Protection Act, TENN. CODE. ANN. 47-18-104; and that the transaction
between the parties is usurious within the meaning of TENN. CODE. ANN. 47-14101 to 125, and should be voided as such. Mr. Perry also seeks enforcement of
his statutory rescission of the transaction under the Truth In Lending Act, 15
U.S.C. 1601 to 1666j and Regulation Z at 12 C.F.R 226.1 to 226.36.
Accordingly, Plaintiff seeks actual, treble and punitive damages under both
federal and state law.
JURISDICTION AND VENUE
2. Jurisdiction is conferred on this Court by 28 U.S.C. 1331 and 15 U.S.C.
1640(e). The Court has authority to render the declaratory judgment Plaintiff
seeks pursuant to 28 U.S.C. 2201.
3. This Court has supplemental jurisdiction over the Plaintiffs state law claims
pursuant to 28 U.S.C. 1367.
4. Venue lies in this District pursuant to 28 U.S.C. 1391(b).
PARTIES
5. Plaintiff, Joshua Wayne Perry, is a natural person residing at 3013 Capps Drive,
Nashville, TN 37207 (hereinafter Property).
6. Defendant Royalty Properties, LLC, is a Tennessee corporation incorporated in
Robertson County and doing business in Davidson County (hereinafter
Royalty). Defendant Sean Queen (hereinafter Queen) is a natural person who
is listed as the Registered Agent for Defendant Royalty Properties, LLC.
Defendant Dawn Leniger (hereinafter Leniger) is a natural person who is listed
as the Trustee for The Capps Drive Trust on the Warranty Deed, Instrument

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Number 20040902-0106589, which is at issue in this case. Upon information and

belief, The Capps Drive Trust was specifically established as part of the
transaction described herein.
FACTUAL ALLEGATIONS
7. The legal description of Mr. Perrys residence, which is in Davidson County, is as
follows:
BEING Lot No. 2, on the Plan of Aldrich Heights, Section 5 of record in
Plat Book 2854, Page 73, Registers Office for Davidson County,
Tennessee, to which plan reference is made for a more complete
description.
BEING the same property conveyed to Joshua W. Perry by deed from
Mildred D. Perry, unmarried, of record in INST: 20000410-0035828,
Registers Office for Davidson County, Tennessee.
This is the same description as in previous deed of record.
THIS conveyance subject to such easements and setback lines of record in
Book 2854, Page 73, said Registers Office,
THIS conveyance subject to a first mortgage payable to NEW SOUTH
FEDERAL SAVINGS BANK of record in Book 5213, page 340; and 2nd
mortgage payable to Wilshire Mortgage of record in INST: 200005080016161, said Registers Office.
BEING the same property conveyed by Joshua W. Perry to Dawn Leniger,
Trustee, THE CAPPS DRIVE TRUST, by Warranty Deed of record in
INST: 20040902-0106589, Registers Office for Davidson County,
Tennessee.
Joshua W. Perry and Joshua Wayne Perry, Sr., is one and the same person.
This is improved property known as 3013 Capps Drive, Nashville TN
37207.
8. Mr. Perry has lived in his home since 1977. He has a high school education and
his work experience consists of mainly manual labor jobs.

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9. Mr. Perry had previously entered into two mortgage loan transactions that were
secured by this property. The validity of these loan transactions is not in question.
10. The Deed of Trust for the first loan (Tennessee Housing Development Agency)
in the amount of $28,100 was recorded at the Registers Office of Davidson,
County, Tennessee on October 12, 1977. This Deed of Trust was later acquired
by New South Federal Savings Bank (hereinafter New South).
11. The Deed of Trust for the second loan (First American National Bank) in the
amount of $20,000 was recorded at the Registers Office of Davidson County,
Tennessee on May 8, 2000. This Deed of Trust was re-recorded on November,
28, 2001 to reflect AmSouth Bank as the new beneficiary of the Deed of Trust.
Wilshire mortgage subsequently acquired the mortgage and is the current holder
and/or servicer of the second mortgage (hereinafter Wilshire/AmSouth).
12. In 2004, Mr. Perry received notice that Wilshire/AmSouth was going to start
foreclosure proceedings because Mr. Perry had become delinquent on this
account.
13. On or around August 12, 2004, Mr. Perry received a letter in the mail from Mr.
Queen as President of Royalty Properties, LLC, entitled HELP Has Arrived!
You can Stop your Foreclosure Now! The letter included an unsigned check
made out to Josh Perry in the amount of $2000.00 as a way to show [Mr.
Perry] that [Defendants] are serious about helping [Mr. Perry]. A copy of this
letter and unsigned check is affixed to the original complaint as Exhibit 1.
14. Mr. Perry contacted Mr. Queen by telephone at some point in the middle of
August 2004. Shortly thereafter, Mr. Queen visited Mr. Perry at Mr. Perrys

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home and told Mr. Perry that he would help Mr. Perry keep his home. Mr. Queen
promised to loan Mr. Perry approximately $11,113.99 to be used as follows:
approximately $3841.99 would be used to catch-up the first and second
mortgage payments; approximately $2272.00 would be used to take care of all the
monthly payments on both mortgages until January 2005, at which point Mr.
Perry would resume monthly payments; and Mr. Perry would receive $5000.00 in
cash. In exchange for making a loan of approximately $11,113.99, Mr. Queen
stated he would charge a $10,000.00 fee. Mr. Queen explained these calculations
to Mr. Perry by making notes on a notepad, a copy of which is affixed to the
original complaint as Exhibit 2.
15. On August 30, 2004, Mr. Queen took Mr. Perry to an office and Mr. Queen had
Mr. Perry sign a number of documents that Mr. Perry did not understand. At one
point, Mr. Perry noticed that the word tenant was on a document and asked Mr.
Queen why the word tenant was under his signature line. Mr. Queen responded
that he was making sure that Mr. Perry could not run off with his girlfriend.
Mr. Perry did not understand why Mr. Queen stated this. Mr. Perry did not ask
further questions because he was nervous and distraught about the possibility of
losing his home through a foreclosure.
16. Mr. Perry unknowingly signed a Warranty Deed granting title of the Property to
Dawn Leniger, Trustee, The Capps Drive Trust. A copy of this Warranty Deed is
affixed to the original complaint as Exhibit 3. Mr. Perry unknowingly signed a
one-year Residential Lease Agreement, a copy of which is affixed to the original
complaint as Exhibit 4. Mr. Perry unknowingly signed a Lease Option Disclosure

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and a Memorandum of Understanding, which are affixed to the original complaint

as Exhibit 5 and Exhibit 6, respectively. Although Mr. Perry no longer has title to
the Property, the Deeds of Trust for the New South and Wilshire/AmSouth
mortgages have at all times remained in Mr. Perrys name.
17. At all times, Mr. Perry believed that he would retain title to his home. Although
Mr. Perry knew that Mr. Queen was charging an outrageous fee, Mr. Perry
believed that entering into a transaction with Mr. Queen was the best way for him
to keep his home.
18. After Mr. Perry signed the documents, he continued to live at his residence at
3013 Capps Drive. Beginning in January 2005, Mr. Perry made monthly
payments to Mr. Queen. At Mr. Queens insistence, Mr. Perry did not mail his
payments to Mr. Queen but gave them to him personally at the Arbys Restaurant
on Dickerson Road in Madison, TN.
19. Mr. Perry continues to reside at 3013 Capps Drive, but his lease expires on
August 30, 2005.
20. According to the Davidson County Property Assessors Office, the property is
currently valued at $94,500. The outstanding balance on the mortgages as of
June 24, 2005 was $15,984.

COUNT 1: SALE/LEASEBACK TRANSACTION IS A MORTGAGE

21. The transaction between Defendants and Mr. Perry is hereinafter referred to as a
sale/leaseback transaction.

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22. Upon information and belief, Mr. Perry had approximately $60,000 worth of
equity at time of the sale/leaseback transaction with Defendants. Mr. Perry did
not intend to sell his property for a mere $11,113.99, especially given that the
New South and AmSouth/Wilshire mortgages remained in his name. The
$11,113.99 that Defendants loaned to Mr. Perry was inadequate consideration to
constitute a sale of Mr. Perrys home.
23. Mr. Perry used the $11,113.99 that Defendants loaned him to pay off existing
debts. He used $3841.99 towards catching-up the New South and
AmSouth/Wilshire mortgage payments and $2272.00 toward the monthly
payments on both mortgages until January 2005. Mr. Perry used the remaining
$5000 to pay other outstanding debts and for his living expenses.
24. After Mr. Perry entered into the sale/leaseback transaction, he continued to live in
his home and had full use of his property. In January 2005, Mr. Perry resumed
payments on the house. The monthly payments that Mr. Perry made were
approximately equal to the amount he had previously paid for both of his
mortgages. Because Mr. Perry believed that Mr. Queen was helping him, he
allowed Mr. Queen to handle all of his communications and payments to New
South and AmSouth/Wilshire. As such, Mr. Perry did not mail in his payments to
the mortgage companies but gave them directly to Mr. Queen.
25. Because the mortgages have at all times remained in Mr. Perrys name, Mr. Perry
has continued to assume the risks associated with ownership of the property, even
though he no longer has title to the property.

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26. Under applicable common law, the sale/leaseback transaction Defendants entered
into with Mr. Perry is an equitable mortgage and should be treated as such.

COUNT 2: FRAUD
28. Defendants intentionally and fraudulently misrepresented to Mr. Perry that they
would loan him money to help Mr. Perry save his house, knowing at the time
that this representation was not true. The statements made by the Defendants,
particularly Defendant Queen, were material misrepresentations designed to
induce the Mr. Perry into the deal. Defendants representations to Mr. Perry went
to the very heart of the transaction. Mr. Perry reasonably relied on the false
representation and was induced into signing several documents by Defendants.
As a result, Mr. Perry unknowingly transferred the title of the property to
Defendants.
29. At all times, Mr. Perry intended to retain title of the property and believed that he
was entering into a home equity mortgage so that he could pay off his outstanding
debts. Had the Mr. Perry known the true nature of the transaction, he would not
have entered into the deal with Defendants.
30. Under applicable common law, Defendants fraudulent misrepresentations to Mr.
Perry make Defendants liable to Mr. Perry for punitive damages.

COUNT 3: UNFAIR AND DECEPTIVE PRACTICE

27. By misrepresenting the terms of the mortgage to Mr. Perry and by having Mr.
Perry sign a Warranty Deed conveying the property to Dawn Leniger as Trustee

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for Capps Drive Trust, Defendant engaged in unfair and deceptive acts and
practices pursuant to the Tennessee Consumer Protection Act, TENN. CODE. ANN.
47-18-104(a). Defendants actions constituted violations of TENN. CODE. ANN.
47-18-104(b), including, but not limited to: (12) representing that a consumer
transaction confers or involves rights, remedies or obligations that it does not
have or involve or which are prohibited by law; (27) engaging in any other act or
practice which is deceptive to the consumer or to any other person.
28. Said violations of the Consumer Protection Act were willfully and intentionally
committed by Defendant. Debtor is entitled to recover three times such damages,
as are proved, together with reasonable costs of the cause, pursuant to TENN. CODE.
ANN. 47-18-109(a).

COUNT 4: USURY
31. The equitable mortgage was structured as sale and leaseback of the real property
to collect interest in excess of the legal rate. The transaction involved a loan of
money pursuant to a written agreement, and as such, subject to the rate limitation
set forth at TENN. CODE ANN. 47-14-103 (2). The formula rate referenced in
that section and defined at TENN. CODE ANN. 47-14-102 (6) was 8.50% as of the
date of this equitable mortgage. The Defendants charged Mr. Perry $10,000 on a
loan of approximately $11,113.99. Under TENN. CODE ANN. 47-14-113, the
interest charged on this usurious mortgage was 10.6 times the lawful formula
rate.

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32. Pursuant to TENN. CODE ANN. 47-14-117 (a), the usurious mortgage in this case is
void and unenforceable. As such, Defendants must execute a Warranty Deed
granting title of the property back to Mr. Perry.
33. Alternatively, this usurious mortgage is subject to reform by the Court pursuant to
TENN. CODE. ANN. 47-14-115 and Mr. Perry is entitled to damages in the amount
of the difference between the market sale price of the home and the loan made to
him by Defendants.
34. The usurious mortgage is also unconscionable within the meaning of TENN. CODE
ANN. 47-14-117 (c). As such, Defendants are not entitled to any interest, fees or
other charges in this transaction.

COUNT 5: STATUTORY RESCISSION

29. The sale/leaseback transaction described herein is a disguised home equity
mortgage. As such, this home equity mortgage is subject to the disclosure and
other requirements of the Truth In Lending Act, 15 U.S.C. 1631, 1638 and
Regulation Z, 12 C.F.R. 226.17, 226.18.
30. Upon information and belief, Defendants are creditors within the meaning of the
Truth In Lending Act, 15 U.S.C. 1602(f) and Regulation Z at 12 C.F.R.
226.2(17) n.3. Upon information and belief, this transaction is a high rate
mortgage subject to the HOEPA amendments to the Truth In Lending Act, 15
U.S.C. 1602(aa)(1), 1639 and Regulation Z 225.32(a).
31. Defendants violated 15 U.S.C. 1635(a) and 12 C.F.R. 226.23(b) by failing to
deliver two copies of the notice of the right to rescind and by failing to deliver all

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material disclosures. Because the transaction described herein met the HOEPA
definition of a high rate mortgage, the transaction was subject to additional
disclosure requirements that must be provided three days in advance of the
consummation of the transaction pursuant to 15 U.S.C. 1639(b).
32. Defendants failure to deliver all material disclosures required by the Truth in
Lending Act to Mr. Perry in connection with the transaction violates 15 U.S.C.
1638. This violation entitles Mr. Perry to actual and statutory damages under 15
U.S.C. 1640(a) and extends their right to rescind the transaction until up to three
years after its consummation.
33. On June 30, 2005 Mr. Perry through his counsel sent to Defendants written
notices rescinding the sale/leaseback home equity loan transaction of August 30,
2004 pursuant to the Truth in Lending Act and Regulation Z. This notice was
duly received by the Defendants on July 5, 2005. A copy of the rescission notices
and proof of delivery is affixed to the original complaint as Exhibit 7.
34. After receipt of the notice of rescission, Defendants were required within twenty
days to rescind the sale/leaseback transaction home equity transaction. Pursuant
to 15 U.S.C. 1635(b) and Regulation Z at 12 C.F.R. 226.23(d), Defendants were
required to terminate the security interest in Mr. Perrys Property and to refund
any monies paid on the account. The Defendants have failed and refused to do
any of these things. Accordingly, Defendants are liable to the Mr. Perry for
$2000.00 in statutory damages, plus such actual damages as may be proved, in
accordance with 15 U.S.C. 1640(a).

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35. Upon information and belief, Defendants have engaged in a pattern or practice of
extending credit to consumers under high rate mortgages, as defined by 15 U.S.C.
1602(aa)(1), disguised as sale/leaseback transactions, based on the consumers
collateral without regard to the consumers repayment ability, including his
current and expected income, current obligations and employment, in violation of
15 U.S.C. 1639(h).

WHEREFORE, Mr. Perry prays for the following relief:

a. That this Court assume jurisdiction of this case;
b. That this case be tried before a jury;
c. A declaration that the sale/leaseback transaction described herein is an
equitable mortgage;
d. A declaration that Defendants fraudulently misrepresented the terms of the
transaction to Mr. Perry, thereby inducing him to enter into the sale/leaseback
transaction described herein;
e. A declaration that the equitable mortgage is usurious and unconscionable and
must be voided, or alternatively, that the agreement must be reformed;
f. A declaration that Defendants is unfair and deceptive under the Tennessee
Consumer Protection Act;
g. A declaration that the transaction is subject to Truth in Lending Act, the
HOEPA amendments and Regulation Z;
h. Rescission of the transaction, including a declaration that the Mr. Perry is not
liable for any fee, finance charge or any other charge imposed by Defendants;

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i. An order requiring the Defendants to terminate the security interest and

convey title to the Property back to Mr. Perry through a Warranty Deed;
j. Actual damages as proved at trial;
k. Three times the actual damages as proved at trial pursuant to the Tennessee
Consumer Protection Act;
l. Statutory damages of $6000, consisting of $2000 for the disclosure violation,
$2000 for the failure to acknowledge the rescission, and $2000 for lending
without regard to repayment ability, all in violation of the Truth in Lending
Act;
m. Punitive damages;
n. A declaration that, because Defendants failed to act in response to Mr. Perrys
notice of rescission, Mr. Perry has no duty to tender the loan proceeds to
Defendants, but in the alternative, if tender is required, a determination of the
amount of the tender obligation in light of all of the Mr. Perrys claims, and an
order requiring the Defendant to accept tender on reasonable terms and over a
reasonable period of time; and
o. Such other relief at law or equity as this Court may deem just and proper.

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Respectfully submitted,

s/ Sharmila L. Murthy_______
Sharmila L. Murthy, BPR #22957
David J. Tarpley, BPR #4059
Legal Aid Society of Middle
Tennessee and the Cumberlands
300 Deaderick Street
Nashville, TN 37201
(615) 780-7133

Attorneys for Plaintiff

CERTIFICATE OF SERVICE
I certify that a copy of the foregoing motion has been served by electronic court filing
and by United States mail, postage pre-paid upon Ralph Mello, Attorney for Defendants
Sean Queen, Dawn Leniger, Capps Drive Trust, and Royalty Properties, LLC, 4514
Harding Road, Suite 315, Nashville, TN 37205.
This the ____ day of August, 2005.
s/ Sharmila L. Murthy_______
Sharmila L. Murthy
Attorney

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