My name got listed as sales agent on Zillow and my phone hasn’t stopped ringing

Last November, I started a bank foreclosure sale on a piece of property in Williamson County, at 2113 N Berrys Chapel Road, Franklin, Tennessee 37069. The foreclosure never happened, because the borrower filed a Chapter 11 Bankruptcy in the Eastern District of California.

When I received the Notice of Bankruptcy Filing, I printed a copy for my file, confirmed on PACER that the Notice was legit, and closed my file. This foreclosure sale is canceled.

In the 3 weeks that the foreclosure was pending, I’d received one or two calls about it.

But, somehow, the property website Zillow picked up my Foreclosure Sale Notice and, not only that, but Zillow has me listed as the sales agent on the property’s Zillow page. My name, address, and phone number (the ONE time I used my cell phone number), all right there online.

Since December, I’ve received probably 4-5 phone calls a week, every week, asking about this property. I’ve received calls from families, from real estate agents, and from property investors. The calls are from local numbers, as well as from far away places as Mississippi, California, Minnesota, and London. They call in the mornings, at night, and on the weekends.

I got a call last night at 8pm. I got one today at 2pm.

At this point, if I get a call from a number that I don’t recognize, I assume it’s somebody calling about “that house in Franklin that you’ve got listed for sale.”

It’s either a testament to the reach of Zillow, or the continued atomic-hot Nashville real estate market.

The people are always really nice. They also have a lot of questions about bankruptcy, when I’ll be foreclosing on this house again, and whether I have other houses I can sell to them.

Sometimes they’ll complain to me about the real estate market, about how expensive everything is and how hard it is to find a deal. Occasionally, they ask about bankruptcy and foreclosures, and, honestly, it’s easier to explain what the automatic stay is and how Chapter 11 works than to try to cut the calls short.

I’ve asked Zillow to remove my name and phone number, to no avail.

So, at this point, I propose this: If any of you are real estate agents and need “new customer leads,” please let me know.

And, finally, if you are reading this after googling “2113 N Berrys Chapel Road, Franklin, Tennessee 37069” and you are interested in buying it, here’s what I have to say:

The sale has been cancelled as a result of the borrower filing bankruptcy. A new sale date has not been set and will not be set in the foreseeable future. Yeah, you know those California judges. No, I don’t know if the kitchen appliances in the pictures are still there. No, I don’t have the keys; I just represent the bank foreclosing on the property.

And, yes, I agree. The real estate market in Nashville is insane.

Will Landlords’ Casualty Paragraphs be a hot issue for Second Avenue businesses? (It looks like they already are.)

The real estate market has been so hot in Nashville over the past 6-7 years that, any time an old building in an in-demand area burns down, I’ve wondered if the culprit was a crafty real estate developer looking to build a high-rise condo. (Kidding, of course.)

But, as matter of law, a disaster can provide a landlord a way out of a long-term lease (whether they’re happy to be out or not), where the premises are fully destroyed.

I thought of this today, when reading the Nashville Post article Old Spaghetti Factory loses lease after 40-year run. Per local news, after total destruction of the building on Second Avenue, the landlord “will be terminating the lease agreement, although the restaurant reportedly has 16 years remaining on that lease.” The article notes that the restaurant is offering to spend more than $1 million of its own money to help rehab the space.

Seems unfair, right? It may be, but it’s probably allowed under the Lease.

Most commercial leases have a “Casualty” section, which dictates what happens when rental premises are totally destroyed, whether by fire, earthquake, or some other huge event.

Those provisions generally require the Landlord to restore the premises to substantially the condition that existed prior to the disaster. If the Landlord does that, then the Tenant is most likely stuck in the Lease. (Yes, even if losing the use its rented space during the repair period kills the Tenant’s business.)

Having said that, the provisions also generally give the Landlord an “out,” if the destruction is so total that the premises can’t easily be restored. In making this determination, a number of factors are considered, including if the cost to restore the building exceeds the ultimate value (and/or insurance money), if the Landlord’s lenders scoop up all the insurance money, the lease is near the end of the term, or if would take too long to restore (180 days from the event is a common measure).

In most cases, the landlord is motivated to repair or rebuild quickly, hoping to get the tenant back in the space–and back paying rent–as soon as possible.

There is no indication in the story whether the landlord here is relying on a similar provision or what types of other issues exist.

It may be that the cost to restore this historic building is so high that the landlord can’t (or isn’t financially ready to) quickly go into rebuilding mode. If the lease uses a typical 180 day requirement, the owner may know that there’s no way to do it in that time with all the special challenges presented by this terrorist event and during a global pandemic.

A skeptic would wonder if this owner wants to renovate a building to a newer, better use (like condos, offices, etc.) or may want to get rid of a long term–possibly below market–lease.

Leases are just like any other contracts. The plain text of their terms control. But, casualty provisions are a rarely negotiated point. When I prepare leases for commercial real estate, it’s often a few paragraphs at the end that I review quickly and move on.

But, when they do apply, it’s a big deal. Just like COVID got every Nashville commercial real estate attorney talking about force majeure, maybe this situation will get us negotiating casualty paragraphs.

In the end, though, yes, this is probably allowed under the lease.

Tennessee is set to increase homestead exemption in 2021

The Tennessee Legislature is, again, considering debtor-friendly changes to the homestead exemption statute.

The one most likely to pass is House Bill 1185, which seeks to increase Tennessee’s homestead exemption from the existing $5,000 to $35,000 for single homeowners and from $7,500 to $52,500 for jointly owned property.

Before you complain too much about that proposal, consider Senate Bill 566, which provides an unlimited exemption for a judgment debtor’s residential real property (and, after the debtor’s death, it passes to the heirs).

Similar proposals were made in 2019, in 2020, and also in 2012 (and a number of times in between). So far, all such efforts have failed, but I believe this is the year that the Tennessee homestead exemption is increased.

Back in 2019, I talked about the importance of exemptions for debtors, since exemptions can preserve and protect a basic necessity level of assets for debtors (picture the clothes on their back, a few thousand dollars in the bank, a car, tools).

As I wrote in 2019, though, “if this new law passes, the downfallen debtor can keep 100% of the equity in his $750,000 house entirely out of the reach of creditors.” I then said:

Wait a second. Is this law designed to protect downtrodden debtors seeking a fresh start in life (who very probably do not have high value real property at all) or, maybe, is it designed to protect high income individuals whose businesses fail?

Because that’s all this proposed law does. It grants fairly absolute protection to the high value real property owned by judgment debtors in Tennessee, and all the garnishments, levies, liens, and bankruptcies will never touch a penny of that equity.

I feel the same way about these new proposals. If we’re talking about protecting the working poor and preserving the necessities of life from garnishment, let’s start somewhere other than $750k of equity in a mansion. Let’s talk about debt relief measures, eviction support, access to justice, etc.

But, these new laws aren’t about basic necessities of life for poor people. Most poor people don’t live in lien-free mansions. Instead, these new measures are being lobbied for by the construction industry.

These are bad proposals. Unless you’re a debtors with big, lien-free McMansion. Then, sure, it’s a great new law.

Bankers: Are your Judgments expiring?

Tennessee judgments expire after ten years.

All those judgments you took during the Great Recession are coming up for renewal. If you don’t affirmatively ask the court for an extension, they just go away.

And, all those builders, contractors, investors, and so many others who were broke in 2010/2011 but who turned things around when Nashville real estate, business, and construction boomed in 2015 (and beyond)?

They’ve been waiting. Hoping that you’d forget about them. Hoping that you’d do nothing to renew your judgment.

Part of what makes this Creditors Rights blog so popular is that I keep it an objective discussion of the law. You don’t see me use it to solicit business. (Well, overtly.)

But, for today, I’ll say this: If you have a box of judgments that you haven’t touched for years…Call or e-mail me immediately. There may still be time.

I’m seeing it happen every day. Big judgments are expiring, and debtors are ridding themselves of millions dollars’ worth of judgment liens.

Once upon a time, the creditor probably got frustrated by the dead-ends (or maybe the expensive lawyers spinning their wheels while billing by the hour). Those old files got put in a file cabinet. Maybe the banker switched banks. Maybe the bank got sold.

But, if you don’t dust off those old files, you are probably leaving money on the table. If you haven’t looked at those old files lately, it may be too late.

Reformation may save you, but tech experts warn against “cut and pasting” document automation

During her presentation on legal tech at the TBA’s 2020 Creditors Practice Forum, Lori Gonzalez conducted an audience poll on what document-automation technology everybody was using.

The creditors’ bar must be an old-school crowd. Overwhelmingly, the most common practice was to: (1) find a similar existing document on your system in Microsoft format; and (2) cut-and-paste the old terms in the forms to match the new terms.

Lori told everybody to stop doing that.

In a recent decision, the Tennessee Court of Appeals explained why. The case is Franklin Real Estate Group, Inc. v. Spero Dei Church, No. M2019-01691-COA-R3-CV (Tenn. Ct. App., Jan. 27, 2021).

There, a real estate broker was working with property owner to sell their church building. Later, the owner asked the broker to, also, assist them in finding a property to buy.

The broker was smart to recognize the need to get a signed “seller’s” agreement; but, in preparing it, the broker “used language from the Seller’s Agreement as a template, simply substituting ‘Seller’ for ‘Buyer’ where appropriate to make the Agreement conform to a standard buyer’s agent agreement.” A classic cut-and-paste document creation.

As the legal tech experts said can happen, the broker missed a cut and paste. And, it happened in a very important paragraph–the one that defined the situation where the broker would get paid. Due to error, the final version awarded a broker a commission only where the Buyer bought a property from a “Seller/Landlord who has been introduced to the property…by Broker.”

It’s such non-sense that you almost read it the way it should have been written, but, in short, the broker would get paid if the client-Buyer bought a property from a Seller who was introduced to his own (the Seller’s) property by the broker. So, basically, if the broker found a Seller who didn’t know they owned the property and the broker was the one to tell the Seller about their property, the broker gets paid.

Total non-sense, and it’s inconsistent with the broker and client’s contemporaneous emails about the engagement.

You know how the rest of the story goes. The buyer ended up buying a property that the broker assisted on, but, for many reasons, didn’t pay a commission.

In defense, the buyer argued that the provision was drafted so poorly that it was unenforceable–that it was “void for vagueness.” The Court noted that “[i]t is a fundamental rule of law that an alleged contract which is so vague, indefinite and uncertain as to place the meaning and intent of the parties in the realm of speculation is void and unenforceable.” See Four Eights, L.L.C. v. Salem, 194 S.W.3d 484, 486 (Tenn. Ct. App. 2005).

But, while the Court agreed that the provision was “illogical,” it went on to find that the rest contract is certain and clear, except for this one provision, which is merely “the result of a mistake.” Instead, the Court decided, the real question is “whether the mistake ..is subject to reformation so that the contract conforms to the true intention of the parties.”

Courts are to enforce contracts as written, but “the law’s strong policy favoring the enforcement of contracts as written must occasionally give way and grant courts the power to alter the terms of a written contract where, at the time it was executed, both parties were operating under a mutual mistake of fact or law regarding a basic assumption underlying the bargain.”

This is called reformation, which seeks “to make the contract conform to the real intention of the parties.” The elements are:

(1) the parties reached a prior agreement regarding some aspect of the bargain; (2) they intended the prior agreement to be included in the written contract; (3) the written contract materially differs from the prior agreement; and (4) the variation between the prior agreement and the written contract is not the result of gross negligence on the part of the party seeking reformation.

The Court then considered many factors, including the the purpose of parties’ overall transactions, relationship, and related communications about the contract.

When I looked at the elements, though, I wondered about “gross negligence.” I mean, if missing a critical word in a contract that you drafted isn’t that, then what is?

The Court addressed that issue head on, finding that the drafting error was not “gross negligence.” The Court wrote, errors resulting from “inattention” are not “categorical exemption[s]” to reformation. If drafting errors were exceptions, then reformation would never be available to correct typographical mistakes.

In the end, it turned out fine for the broker, after, of course, years of litigation.

Listen to Lori on this point, consider a more advanced technology for your document automation. Because no lawyer wants to have to defend their work as “sure, it’s inattentive, but…”

Legal Tech, but for lawyers who miss the camaraderie of docket calls

Last week, I had to go to the Davidson County Courthouse to file some garnishment pleadings. With the adoption of e-filing and suspension of in-person court proceedings, filing garnishments is really the only reason I set foot in the building.

Once upon a time–well, about a year ago–I’d spend nearly every Friday morning there, on the fourth floor, checking in on all of the Chancery Court dockets.

Some days, I’d have a case in every courtroom, carefully timing my arrivals so that I could cover all four. On other days, I might just have one case, but I’d linger and roam the halls to see who was there and what cases they had. It was a great way to catch up with other lawyers, talk about our cases, watch interesting hearings, observe how the judges handled issues, and, really, just stay connected to what was going on (i.e. gossip).

But, last week, it was so strange, to be back in that building and it all be so quiet.

Continue reading “Legal Tech, but for lawyers who miss the camaraderie of docket calls”

341 Stories: Lawyer Compensation Week, the modern business obituaries

Welcome to January 21, 2021, the first full day of the Joe Biden administration. It’s also an interesting time for law firms…

Most law firms announce compensation plans this week. The first week of the year is generally spent winding down last year’s financials. The following week is spent distributing bonuses.

This third week, though, may be the most important. It’s when the new year’s salaries are announced. Associates and partners alike sharpen their advocacy skills, to explain away last year’s billables and to demonstrate how this coming year will be the biggest one yet. And, of course, that they deserve a big raise.

If you’re a lawyer in a “discretionary” system (i.e. you advocate to a “compensation committee” for a higher salary), you have limited arguments available. In fact, the presentations generally focus on two metrics: (1) I promise to bill more hours; and/or (2) I am raising my billable rate.

Neither of these are particularly good outcomes for clients.

Unless there was some external factor that limited hours (illness, leave of absence, COVID), where can a lawyer find 100-200 more billable hours in 2021? Is the lawyer simply going to work harder? Maybe. In other cases, the lawyer will just pad their time and that letter that took a “0.3” in 2020 now becomes a “0.5” letter.

And, sure, inflation or more experience can justify an increase in an hourly rate, but is the increase really based on that, or has the lawyer just figured out that a $15 increase multiplied by 1,800 hours equals $27,000 more in profit?

When a rate increase is based only on a new calendar year, it can lead to unjustified results.

Law firm leadership has no incentive to push back on these issues. More hours and higher rates mean more money to them too. In short, the fox is in charge of making sure the barn door is locked.

All I’m saying is, clients, watch your bills next month.

Despite the pandemic and overall concerns about the economy, legal rates are going up. In March, we all talked about how commercial real estate, transactions, and law firm profits were dead. But, locally, that hasn’t been the case.

In general, law firm hourly rates are rising. The pessimist would say that law firms are increasing hourly rates to offset the reduction in actual hours billed. The optimist would say that the commercial economy is as strong as it ever was and that rising rates reflect the market.

Get your insolvency news from McLemore Auctions. I love getting the weekly emails from McLemore Auctions that show all the cool stuff being auctioned, usually via a going-out-business liquidation. In fact, one of the biggest mistakes I made during the pandemic was to show my children the website, which has resulted in a few really strange family purchases.

A few weeks ago, I noted the concept of “funeral by auction” after seeing how frequently the fixtures and assets of many Nashville restaurants end up being sold on the McLemore site. In fact, based on my review of today’s Nashville Post, it seems like the McLemore website may be the earliest public notice that some local businesses have closed.

And, yes, it really stinks to be shopping for deals on gaming chairs, and you see the cafe where you proposed to your wife being sold off, piece by piece.

Remember to shop local. I cringe when I see a local restaurant on the McLemore website. It’s often because I hate to see a small business owner give up, and I feel a little guilty thinking about the last time I spent my money at that local business.

This restaurant closure really hurt. Yesterday, the Nashville Post reported that Woolworths on Fifth was closing. Woolworths was a beautiful restoration of the historic lunch counter where many brave African American students and leaders took a stand to demand equality in our city.

I frequently took guests there for lunches over the years, and I was always proud to share that history. I also worry what’s next and whether the future operators will respect the history of the site.

There’s no stay in judgment appeals (unless you ask for one)

There’s a bit of confusion about appellate bonds, particularly when it comes to money judgments from a court of record.

“Is what I’ve filed good enough to protect my client from an immediate garnishment?” That’s not a legal question that any attorney wants to learn after a client’s bank account gets hit.

In every appeal, the Appellate Court Clerk’s office charges certain filing fees for the Notice of Appeal. At the same time, the appellant must file an Appeal Bond for Costs, which is a bond (generally signed by the attorney) to cover the court costs in the appeal (generally, a nominal amount).

Judgment enforcement is automatically stayed for thirty days after entry pursuant to Tenn. R. Civ. P. 62.01. But, here’s the key: The filing of an appeal and posting that initial “cost bond” do not automatically stay enforcement of a creditor’s rights under a judgment.

You’ve got a valid appeal, but you don’t have any stay on enforcement.

In order to obtain a stay of collections after the appeal is filed, the appellant must file a motion with the trial court. Ultimately, this is done by filing a “stay bond,” but, until the trial court grants such a motion and approves the amount of the bond, there is no stay of judgment enforcement. See Tenn. R. Civ. P. 62.04. Tenn. R. Civ. P. 62.05 requires that the bond be in an amount sufficient to pay “the judgment in full, interest, damages for delay, and costs on appeal.”

In short, just filing an appeal and posting a cost bond does not stay the enforcement of a judgment. Bank levies, wage garnishments, all of that can still happen.

And, if you’re a litigant or attorney who doesn’t understand this issue, then there’s a good chance that you’re in for an unpleasant surprise during your appeal. Don’t be that lawyer.



United States Supreme Court: Post-bankruptcy possession doesn’t violate automatic stay

It’s rare the the United States Supreme Court decides a legal issue that affects everyday consumer bankruptcies, but today was one of those days.

In City of Chicago, Illinois v. Fulton, the Supreme Court ruled unanimously that a creditor who repossesses property prior to a bankruptcy filing is not required to release that property after the bankruptcy filing. Per today’s opinion, “mere retention of property does not violate the [automatic stay in] § 362(a)(3).”

This case has real-world implications for creditors, mainly car loan creditors. In the past, if a lender repossessed a vehicle and the borrower filed a bankruptcy case, the debtor would then demand immediate release of the car.

The argument has been that the secured creditor would be in violation of the automatic stay, unless it immediately released the vehicle to the debtor. In our Nashville bankruptcy local practice, the creditor attorney would generally ask for “adequate protection,” meaning proof of insurance on the car and proof that the debtor was proposing a reorganization plan that would pay for the car.

But, in short, if the car creditor tried to keep the car after a bankruptcy was filed, the creditor was swimming in risky waters. That continuing exercise of possession, most of our bankruptcy judges would say, was an action to collect a debt and a stay violation.

Justice Alito’s opinion walks a fine line, noting that 11 U.S.C. Section 362(a)(3) “prohibits affirmative acts that would disturb the status quo of estate property.” The opinion says that simply holding property is not affirmative act; it’s just maintaining the status quo.

While it’s true that that Section 362(a)(3) prohibits “exercising control over estate property,” Alito wrote that this text “suggests that merely retaining possession of estate property does not violate the automatic stay.” The words used in §362(a)(3) “halts any affirmative act that would alter the status quo as of the time of the filing of a bankruptcy petition.” An automatic stay is not “an affirmative turnover obligation.”

In the end, the Supreme Court wrote that “We hold only that mere retention of estate property after the filing of a bankruptcy petition does not violate §362(a)(3) of the Bankruptcy Code.”

This case creates as much trouble as it resolves, honestly. In practical application, where the creditor has repossessed the car, when does the creditor turn it over? In its discretion? After negotiation of plan repayment terms? Never (i.e. the creditor keeps the car and files a motion for stay relief to take an affirmative action–a sale)?

Law Students: Law School Grades Will Not Define Your Career

Over the long New Years holiday, I found my law school’s “Lawyers of the Future” picture book in a box while cleaning out my basement.

This was a booklet all University of Tennessee College of Law students were given at the start of a school year, with pictures and biographies of all the law students.

My plan had been to throw all of this stuff away, but I just couldn’t. Instead, I strolled down memory lane, looking at all the faces of the people who I’d assumed would be part of my professional life forever, as opposing counsel, judges, and law partners.

Twenty years ago, though, I looked at those faces with less sentimentality. Back then, I looked at those people and their prestigious backgrounds, mainly, as competition. Competition for grades. For law review. Moot Court. Summer Jobs. Clerkships. Associate positions.

Lawyers, do you remember how much you agonized over your first semester 1L law school grades? I mean, it felt like everything in your life depended on Criminal Law, Contracts, Civil Procedure, Legal Writing, and Torts.

Law school grades just absolutely consumed our lives.

Continue reading “Law Students: Law School Grades Will Not Define Your Career”