After starting at a very judgment-debtor friendly 5.25%, the rate has steadily increased over the past few years. Last year, it hit a new high of 7.5%.
But, effective January 1, 2020, the rate is heading in the opposite direction: The rate dropped to 6.75%.
Honestly, I don’t even care about the 0.75% drop. What drives me crazy is the constant changes in the post-judgment interest rate. It’s made calculating post-interest nearly impossible, since you have to constantly adjust the per diem.
In this robust Tennessee economy, I get weekly phone calls from closing companies, who discover one of my old judgments (and related judgment lien). And, yes, computing payoffs on old judgments is a wonderful task that I gleefully undertake, but it really used to be a lot simpler (and, also, this was one of my earliest reactions to the new statute).
I love collecting money for clients, but, holy smokes, I don’t always love math.
But, don’t worry. A bankruptcy filing doesn’t mean that the South’s favorite tiny hamburger is going away. In fact, there’s a good chance it’ll be a stronger chain after all this.
Krystal’s financial problems appear to be a relatively new problem, based on documents filed in the main Bankruptcy case.
As part of the case, the lead company filed a Declaration by its Chief Restructuring Officer, who has been trying to help Krystal correct course (and hired very recently, in November 2019).
Of the nearly 300 locations, the company closed 44 locations in 2019, including 13 closures on December 15, 2019 (in anticipation of the bankruptcy filing, I’d assume).
The quick summary? “Shifting consumer tastes and preferences, growth in labor and commodity costs, increased competition, and unfavorable lease terms.” You can download and read a full copy of the Declaration here:
The Declaration tells the story of the events leading up to the bankruptcy filing, starting with the invention of the “iconic square hamburger patty slider” in 1932. It’s written by bankruptcy lawyers, so don’t expect a glowing press release.
The summary of the problems is this:
Increased competition due to “proliferation of fast casual restaurants as well as online delivery platforms…”
“Difficulty finding and retaining qualified employees…”
Entry into an expensive store rebuilding program, at a cost of about a million dollars per location.
Default under a Forbearance Agreement on a $50 million loan.
A “security incident” involving one of the company’s “payment processing systems.”
In a nutshell, the Bankruptcy docket tells a familiar story, about how a changing industry landscape is creating havoc in long-standing businesses.
This is obviously early–in fact, all the filings I looked at are what is called the “First Day Motions.” But, given the amount of debt involved and brand recognition–and, yes, I’m talking about the out-pouring of concern on twitter–I suspect Krystal’s can figure this reorganization out.
And, honestly, I’ve eaten a lot of Krystal’s during my time. If part of the reorganization is shutting down bad stores and remodeling others, I think it’s a good plan.
Service of process is a hot issue in Tennessee law. The reason is obvious: Without proper service of process, any subsequent action taken in a case is void.
Part of the reason service issues are coming up so frequently lately is the comparison between the 2009 economy and the 2019 economy. Judgment debtors have more money (and reason) to fight now, including more money to fight old judgments.
Looking at the returned Summonses, the individual had a pretty good argument, since both the corporate and individual defendants were served at the business address, when the Sheriff served both Summonses at the corporate address, by serving the person at the front desk.
Under Tenn. R. Civ. P. 4.04, an individual defendant shall be served “personally” or, if she evades, by leaving the copies at her “dwelling house or usual place of abode with some person of suitable age and discretion then residing there…”
Long story short, the Sheriff didn’t serve Santoro personally and the business address wasn’t his house, and, as a result, Santoro had a really good argument on paper.
But, Plaintiff had some really good lawyers. Instead of stopping their work on the face of the Summons, they really dug in on who accepted service. They deposed the person, and they also found at other lawsuits where this person was authorized to accept service for the individual. And, they took care to get all this information properly introduced into the record.
With all this background proof in the record, the trial court found that the agent had implied authority to accept service. In affirming, the Court of Appeals wrote:
An individual may appoint an agent for the purpose of receiving service of process, giving that agent either actual or implied authority. Implied authority “embraces all powers which are necessary to carry into effect the granted power, in order to make effectual the purposes of the agency.” Implied authority can be “circumstantially established through conduct or a course of dealing between the principal and agent.’ ” However, the existence of implied authority is determined by the “ ‘act or acquiescence of the principal,’ ” rather than the actions of the agent.” With respect to service of process, “the record must contain ‘evidence that the defendant intended to confer upon [the] agent the specific authority to receive and accept service of process for the defendant.’ ”
Id. at * 5 (internal citations omitted).
In the end, Plaintiff’s counsel’s thorough analysis of the facts and getting those facts into the record carried the day.
It’s telling that this opinion was written by a fairly new appellate judge, Judge Carma McGee, who spent years as a trial judge. This is a smart, well-reasoned opinion, and all credit goes to the trial counsel, who gave the Judge the proper facts.
Posting the proper bond in an eviction appeal in Tennessee is confusing and, sometimes, very expensive. Remember, though, if a landlord is granted an eviction judgment, the tenant can still have a valid appeal, even if the tenant doesn’t post the possessory bond required by Tenn. Code Ann. § 29-18-130(b)(2).
The Tennessee Court of Appeals issued an opinion yesterday, affirming this line of decisions, in Thomas v. Millen, W2019-00086-COA-R3-CV (Tenn. Ct. App., Dec. 19, 2019). This case cited the Court’s own recent, similar opinion at Belgravia Square, LLC v. White, No. W2018-02196-COA-R3-CV, 2019 WL 5837589 (Tenn. Ct. App. Nov. 7, 2019).
Long story short, the possessory bond is not jurisdictional, meaning the circuit court has jurisdiction to consider the issues, and an appeal remains valid despite the failure to post the § 29-18-130(b)(2) bond.
As a practical matter, most eviction appeals will die once the tenant loses the right to possession. But, not all. In that situation, the tenant could be dispossessed of the property, but the tenant can still challenge the landlord’s rights and, if successful, seek monetary damages against the landlord if the tenant wins.
That type of fight does happen. I’ve had an opposing party / tenant lose in Sessions, appeal to Circuit, lose possession in Circuit, but continue fighting my matter…all the way to the Supreme Court. The United States Supreme Court.
Under new(-ish) Rule 69.04, this can be done via Motion, but the Motion itself must be filed prior to the expiration of the judgment. So, Tennessee creditor rights attorneys, the burden is on you to make sure you’re making a list and checking it twice, looking for judgments that are nine years old, right?
What happens if your law firm gets the judgment for a client but fails to renew the judgment?
In that case, the law firm obtained a judgment, generally discussed the 10 year requirement with the client, and, years later, no renewal request was made; the clients sued for malpractice.
There’s a lot to unpack in this case, but here’s my quick take-away:
When you get a judgment for a client, tell them that it will expire in ten years. As part of that message, remind them that people change firms, lawyers die, files get closed, files get dormant and sent to storage, things change, but, no matter what happens, if they want you to renew the judgment in ten years, they have to call you and specifically ask you to do it. Your representation does not necessarily include this renewal request, unless you and the client agree it does.
That was a decisive fact here, that the law firm had put the client on notice that specific action was needed to renew this judgment before ten years passed. As that ten year mark approached and passed, the client didn’t raise the issue, either by confirming that the firm did it or, alternatively, suing them for malpractice within one year of the failure to renew it.
So, in a perfect world, we calendar up all our judgments for renewal and we discuss the action with our clients in advance and mutually agree on an engagement for a renewal.
But, in reality, a lot of things can change in ten years. A good practice is to make sure that the client understands that it has a responsibility in ten years to notify you that it wants you to take this action.
It’s the holiday season, where we’re bombarded with commercials about door-buster sales and new Lexus cars with red bows on them.
But, at the movie theatres, there’s that Mr. Rogers movie, with the one scene that I’ve seen lots of people talking about.
The scene is based on an award acceptance speech, in which Mr. Rogers asks the audience to take ten seconds to think about the people who have helped him become who they are, to think of the people who have cared about them and helped them in their lives. Here’s a full clip, courtesy of Taye Diggs.
It’s an awesome moment. For this holiday season, I’d take it one step further: Who are the people who are thinking about you and the help that you gave to them?
This is a really indirect way by me of asking you to volunteer your legal skills to help others before the year is over.
This is an incredible program, which helps people clear up their record and get better jobs. This can have a life changing impact on the people who need this service, and, the way the day is structured, you don’t need to know criminal law. You show up, and they’ll teach you everything you need to know.
Your time is an incredible gift, and you’ll leave knowing that you’ve done something to help others. You’ll be the person on people’s minds when they think about those who help.
A new opinion from the Tennessee Court of Appeals provides valuable guidance to attorneys foreclosing on commercial properties.
The matter is Tennessee Funding, LLC. v. William Worley (No. M2019-01099- COA-R-CV, Tenn. Ct. App. Nov. 26, 2019), and the issue was whether a foreclosing lender took ownership of the contract rights associated with the real property–specifically, whether the foreclosure sale of the entire residential development transfer ownership of the “developer’s” or “declarant’s” rights of the property.
The actual issue was more nuanced than that and, trust me, I know (I represented the prevailing party in both the trial and appellate courts). The full opinion can be found here.
For purposes of this blog post, I won’t bore you with the deep analysis, but here are the main takeaways from yesterday’s decision:
In many development loan/construction loan transactions, the lender will be granted both a lien on the real property and a UCC lien on all the “other stuff” associated with the development project.
A real property foreclosure pursuant to the Deed of Trust and Tenn. Code Ann. § 35-5-101, et. seq., transfers to the foreclosure buyer all of the dirt.
The real property foreclosure does not transfer ownership of all the “other stuff,” including contract rights associated with the development.
These contract rights can include plans, drawings, and, yes, developer’s rights under a Master Deed or Declarations (i.e. the right to manage the development/developed property).
The rights are personal property, and those rights must be transferred by a creditor’s UCC Sale under Article 9, including Tenn. Code Ann. § 47-9-610.
Ultimately, that was the critical factor in this case–that the foreclosing lender did a dual sale–a foreclosure under the Deed of Trust to purchase the dirt and a UCC sale under the Security Agreement to purchase the personal property.
Keep this case in mind the next time you represent a creditor contemplating a foreclosure on a property development. You may not be doing your job if you only foreclose on the land.