Attend the Creditors Practice Annual Forum 2016, Learn Foreclosure in an Hour!

On September 28, 2016, some of the greatest creditor minds in Nashville will gather for the Creditors Practice Annual Forum 2016. Yes, I’m talking about foreclosures again.

Topics to be covered include:

  • Perfection and Enforcement of Liens for Prime and Remote Contractors
  • Non-Judicial Foreclosures in Tennessee
  • Ethical Issues Related to the Consumer Financial Protection Bureau
  • TBA Special Committee on the Evolving Legal Market Report

I’ll be presenting the Foreclosures portion of the seminar, which will give a one-hour overview all the laws, defenses, and issues facing lenders conducting foreclosures in Tennessee.

This should be a good seminar, so be sure to sign up to attend the live presentation, or use some of your free CLE credits from your Tennessee Bar Association membership to watch it online.

 

Ex-Tennessee Titan Sued by Former Landlords for Property Damage

Real Estate is hot in Nashville. That’s not a news flash. In fact, unless you were burned in the economic downtown, you’ve probably always thought that real estate is a safe investment, either has an appreciating asset or as an income producing asset.

With high-end real estate, the income possibilities in this current market are endless. Short term rentals to tourists on AirBNB. Long term leases to health care executives. Leases to country music stars or professional athletes.

Well, one Nashville couple has learned the hard way that leases to star football players may require a greater security deposit.

In a lawsuit filed against former Tennessee Titan running back Zach Brown, a landlord for rental property has sued in Nashville’s Davidson Chancery Court (Rental Lawsuit), alleging failure to pay rent. After they were awarded a judgment in a prior detainer action, they were surprised to find the property in terrible condition, the lawsuit alleges.

The $59,286.85 in damages alleged includes claims of: animal teeth marks on staircases and doors; stains on carpet; “damage to the walls by what appears to be repeated throws of footballs and darts;” holes in the wall; and door frame damage “from where it appears a locked door was forced open.”

These are just allegations, but, long story short, a property owner opens the door to deterioration and damage when he or she rents to a stranger. There’s no such thing as easy money, and the landlord / tenant model has its fair share of risks.

 

 

 

The Doctrine of Prior Suit Pending is What it Sounds Like

Sometimes, legal concepts have names that make no sense. “Qui Tam” Actions. “Quiet Title” Complaints. “Res Judicata.” “Equitable Subrogation.”

In other cases, the concepts have straight-forward names. Like “prior suit pending,” which is a concept that I’ve never specifically researched, but always felt like I understood–based solely on its name.

Yesterday, the Tennessee Court of Appeals issued an opinion in Rafia Khan v. Regions Bank, et. al., No. E2015-01891-COA-R3-CV, May 25, 2016,  that explains the elements of this concept.

And, you’ll be pleased to know, it’s as simple as it sounds: “The doctrine of prior suit pending is well-established in Tennessee law and provides that a lawsuit is subject to dismissal where a prior lawsuit involves the same parties and subject matter.” See West v. Vought Aircraft Indus., Inc., 256 S.W.3d 618, 620 (Tenn. 2008).

There are four elements:

  1. the lawsuits must involve identical subject matter;
  2. the lawsuits must be between the same parties;
  3. the former lawsuit must be pending in a court having subject matter jurisdiction over the dispute; and
  4. the former lawsuit must be pending in a court having personal jurisdiction over the parties.

When considering whether the subject matter is the same, the Court wrote, this analysis “applies not only to issues actually raised in the first suit, but also to issues that could have been raised regarding the same subject matter.”

In short, the defense is as simple as it sounds: Where a prior lawsuit exists on the same factual and legal issues, a litigant may be able to dismiss any subsequent lawsuit on those same issues (or closely related issues that could have been raised).

Keep in mind, however, that lawyers tend to give simple concepts complex names, but this one must have just slipped past.

Why Do Tennessee Court Clerks Hold Garnished Funds for Twenty Days?

You’ve got your judgment. You’ve waited for the appeal period to expire. You’ve issued your garnishment. And, finally, the Clerk has some money for you. But, they say they have to hold it for 20 days. 20 more days!?!

Why? Where does this 20 day period come from? It’s on the garnishment forms, I know, but what’s the basis for holding the funds under the Rules of Procedure or under Tennessee statutes?

The answer is Tenn. Code Ann. § 26-2-407, which allows a judgment debtor to file a motion to quash a garnishment, in order to assert certain exemption rights, within twenty (20) days from the levy.

Wait a second, you might be thinking. What about Tenn. Code Ann. § 26-2-114, which says that “a claim for exemption filed after the judgment has become final will have no effect as to an execution which is issued prior to the date the claim for exemption is filed, and as to such preexisting execution the claim for exemption shall be deemed waived.”

In layman’s terms: If you don’t claim the exemption before the garnishment is issued, then it’s waived. Why on earth, then, a procedure exist to assert a claim that was waived?

Here’s how this works: Tennessee statutes allow some assets to be absolutely exempt. These assets include: social security benefits; certain government pensions; certain health care aids; unemployment and veterans benefits; and certain insurance benefits. (See Tenn. Code Ann. § 26-2-404 for a list.)

These assets are “untouchable,” and, as a result, the motion to quash procedure exists to make sure that the garnishment doesn’t catch those specific items.

As a practical matter, a judgment debtor use this time period to file a Slow Pay Motion or file a Bankruptcy, but, under Tennessee law, they’ve actually got a very limited basis to attack your garnishment during the 20 days. If it’s not one of those listed exemptions, you’ll probably get your money…in twenty days.

Lawyers Beware: New E-Mail Scams Using Fake E-mails Target (and Catch) Local Law Firm

I’ve talked about the new versions of the Nigerian e-mail scams targeting lawyers, but now there’s an even newer scam that lawyers need to be aware of.

This new threat, referred to as a “Business Email Compromise” scheme, entails a hacker breaking into the lawyer’s email account, monitoring the emails for some period of time, and waiting for a transaction involving a wire transfer to be discussed.

Once a transaction is identified, the scammer will then send a fake email (using a slightly modified e-mail address) that appears legitimate (at a glance) from one of the parties, but directs the party holding the funds to wire those funds to a different account than previously discussed. This new account is one controlled by the scammer.

If you think this can’t happen to you, then read this Complaint filed in Davidson County Chancery Court on April 26, 2016 (link here: 201604271031.). In that lawsuit, the scammers diverted nearly $900,000 from two property closings in March 2016 using emails that were slight variations of the real accounts.

Instead of “flippin@click1.net”, they used “flippin@cliick1.net”; Instead of “richardbacon50@comcast.net”, they used “richardbacon50@comcastt.co.”

Using these fake email accounts, the scammers sent the closing agent “follow-up” emails, presenting new wire recipient account information. By the time the fraud was discovered, the money was gone, and the only parties left to sue were–you guessed it–the closing attorneys who didn’t notice the changes in the emails.

Here are some red flags to watch for:

  • A last second change in wire instructions;
  • The change in wire instructions is made only via email;
  • A request that funds be released earlier or on an expedited basis;
  • The request uses broken English or bad grammar;
  • The new wire instructions uses an offshore institution or an institution you’ve never heard of; or
  • The new wire instructions involves payment to a person/party not previously in the transaction.

Some best practices in these situations are to:

  • Include wire instructions as part of, attached, and incorporated into the settlement statement personally executed by the parties; and
  • Before wiring any funds, verify the accuracy of the existing (or new) wire transfer instructions by a telephone call to the proper party receiving the funds (not the potentially fraudulent address on the e-mail or potentially fraudulent telephone number included in the e-mail).

As lawyers incorporate new technologies into their practices, so do the ways that scammers can use that technology against lawyers. Watch out.

15 Day Continuance Limit on Detainer Actions

A few weeks ago, I talked about detainer warrants and how fast a landlord can get an eviction hearing set (a minimum of six days from service of process).

A caveat, however, is that many courts will allow continuances, especially when a plaintiff has set a hearing on such short notice. Some courts, like Davidson County, have Local Rules that expressly allow some continuances.

But, the ability to get a continuance in detainer actions isn’t absolute. Tenn. Code Ann. § 29-18-118 provides that the “general sessions judge may, at the request of either party, and on good reason being assigned, postpone the trial to any time not exceeding fifteen (15) days.”

In eviction actions, a landlord isn’t getting paid, so the delay costs the landlord both time and money.

Detainer Warrants: When can I get them Out?

Tennessee’s General Sessions Courts provide the fastest justice in the state. There, a plaintiff can file a lawsuit and, potentially, have a judgment in as early as 2-3 weeks.

No plaintiffs, however, are as eager to get to court than landlords. A common question I get is: What is the quickest court date a landlord can get?

The answer is in Tenn. Code Ann. § 29-18-117, which provides: “The officer serving the warrant shall notify the defendant of the time and place of trial, the time not to be less than six (6) days from the date of service.”

So, in order to have a valid eviction lawsuit, you have to provide–at a minimum–six days notice from the date of service of process.

Note:  This timeline is for commercial property evictions. Residential evictions are governed by the Uniform Residential Landlord and Tenant Act , and that is it’s own blog post.