David

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 may 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.

Post-Judgment Interest Rates in Tennessee Have Finally Increased (by .25%)

Back in July 2012, the Tennessee legislature passed a new “post-judgment” interest statute, which can be found at Tenn. Code Ann. § 47-14-121. As I said back then, it was a big change: Instead of a blanket “10%” rate, Tennessee would be using a variable rate, tied to the “formula rate published by the commissioner of financial institutions.”

Long story short: I hate it when the law replaces something simple with something complicated.

Since the enactment of the statute, the post-judgment interest rate has been 5.25%, until January 1, 2016, when it jumped up to 5.5%.

The sky has not yet fallen, however, like I said it would. My biggest concern was: “[t]here appears to be an obligation to research and modify the rate every six months. Payoffs just got a lot more difficult.” I don’t like math.

After a few years with the statute, I’m of the opinion that the interest rate on a judgment is set at the date of the judgment and then doesn’t change. As a result, there’s no need to track the ups and downs of the statutory rate.

But, to be entirely safe, I always recite the exact post-judgment rate in effect at the time of my judgment in my judgment, to save any confusion and subsequent research.

Erin Andrews Judgment May Not be Easy to Collect Against Hotel Defendants

After a stalker took authorized “peephole” footage in her Nashville hotel room, Erin Andrews filed a lawsuit in Nashville in 2011 against the the stalker and the hotel entities for invasion of privacy, negligence, and negligent infliction of emotional distress. Here’s my post about the initial lawsuit, with a link to the Complaint.

For the past two weeks, Nashville has had the attention of sports and legal fans, as Andrews’ case was tried in front of a local jury. I was in the courtroom on Friday, to watch the lawyers make their closing arguments to the jury. It’s not often you get to see a fight over $75 million dollars.

Yesterday, the jury announced their verdict: A judgment of $55 million, with the stalker responsible for 51 percent of the blame, and the two hotel companies responsible for 49 percent (Note: Tennessee is a “comparative negligence” state). By my math, the hotel defendants are liable for about $27 million of the judgment.

After the judgment was announced, a number of media outlets analyzed the judgment. Some said that it may be appealed as excessive. Others focused on how much the lawyers are going to profit from it.

Sports Illustrated ran a story on her ability to actually collect the money. The article makes a good point about the stalker–that he’s in prison and probably “judgment proof.” That means that, even though he’s obligated to pay the money, his ability to earn money is diminished and he’ll be broke for the rest of his life.

The hotel defendants, however, are a different story. They appear to have strong cash flow, and they’ll probably look to their insurance carriers for some funds. Corporate bankruptcy may be an option, given the amount of the award. Most likely, the article concludes, the corporate defendants may appeal the amount of the award and, at the same time, work on a settlement agreement.

Here is my sales pitch: I will collect this Judgment. If you’ve read this blog or attended any of my collection seminars, you know the first thing I’d do: Record a Judgment Lien.

The hotel property at 2555 West End Avenue is in the heart of Nashville’s hottest district, and the property has a tax appraisal of $36,477.600. If the Judgment is recorded, then the defendants can’t refinance, sell, or do anything with the property without paying the judgment.

So, that’s that, right? Not so fast.

West End Hotel Partners, LLC doesn’t own the property; Vanderbilt is owner and West End Hotel Partners operates the hotel on the land pursant to to a 40 year ground lease. This means that Vanderbilt owns the property, but that the hotel has a long-term right to use the property, including construction of improvements. At the end of the lease, the hotel may revert to the ownership of Vanderbilt.

Regardless, a judgment lien attaches to whatever interest in the land a defendant holds, including this ground lease. The creditor may not get everything, but the lien would attach to enough to get their attention and complicate any future transactions related to the property.

Here, as always, record a judgment lien as the first step in collecting on a judgment.

Tennessee Detainer Actions: Not Just for Tenants and Landlords

What if you own real property, but someone else has possession of the property, and you want them gone? You evict them. But, as you’ll see under Tennessee statutes, they don’t call it an “eviction” lawsuit; they call it a “detainer” lawsuit.

The statute in Tennessee is Tenn. Code Ann. § 29-18-104, titled “Unlawful Detainer.” That statute provides:

“Unlawful detainer is where the defendant enters by contract, either as tenant or as assignee of a tenant, or as personal representative of a tenant, or as subtenant, or by collusion with a tenant, and, in either case, willfully and without force, holds over the possession from the landlord, or the assignee of the remainder or reversion.”

These detainer actions are generally brought in general sessions court, where, as I’ve noted before, you can exceed the $25,000 jurisdictional limit. Also, even though general sessions appeals are very easy on most matters, they are complicated and expensive in general sessions court.

So, if you’re a landlord, you’re probably reading that statute and thinking it’s exactly what you need, right? But, what about if you’ve purchased the property, either by a typical sale or a foreclosure? In that case, you’re not a landlord, and the defendant isn’t entering by contract (i.e. lease). Does a different statute apply?

No, said the Tennessee Court of Appeals in Federal National Mortgage Association v. Danny O. Daniels, W2015-00999-COA-R3-CV (Dec. 21, 2015). There, the Court noted that the Deed of Trust will create “a landlord/tenant relationship … between the foreclosure sale purchaser and the mortgagor in possession of the property,” and, as a result, “constructive possession is conferred on the foreclosure sale purchaser upon the passing of title; that constructive possession provides the basis for maintaining the unlawful detainer.”

In such a case, a plaintiff must prove: (1) its constructive possession of the property (i.e. ownership of the property); and (2) its loss of possession by the other party’s act of unlawful detainer.

In short, the detainer statutes in Tennessee aren’t well crafted. Sometimes they reference landlords and tenants; sometimes they don’t. Courts have a tendency to construe statutes as written and to assume that the legislature means what it says when it uses specific words. That’s bad news for the foreclosure sale purchaser, who isn’t a landlord and who isn’t dealing with a tenant.

Here, however, it’s clear that the legislature should have proofread the statutes a few more times. Fortunately, Tennessee courts have applied the statutes in a broader sense.

Exaggeration of Lien Rights Can Lead to a Counter-Claim for Attorney Fees in Tennessee

The ability to record a lien on a debtor’s property is one of the strongest tools in the creditor’s arsenal. I mean, I am always talking about judgment liens. Liens get creditors paid.

That’s part of the reason why materialman/mechanic’s liens are such a great tool for contractors supplying labor and materials to real property.

But, there’s one note of caution in Tennessee: Don’t be so eager to claim lien rights that you exaggerate or overstate your rights.

I’m talking about Tenn. Code Ann. § 66-11-139, which provides the following remedy to a property owner who is facing a defective and/or fraudulent lien claim. That statute says:

If, in any action to enforce the lien provided by this chapter, the court finds that any lienor has willfully and grossly exaggerated the amount for which that person claims a lien, as stated in that person’s notice of lien or pleading filed, in the discretion of the court, no recovery may be allowed thereon, and the lienor may be liable for any actual expenses incurred by the injured party, including attorneys’ fees, as a result of the lienor’s exaggeration.

Some courts will remove all lien rights–even the portions that are valid–where a contractor overstates its lien rights. Although Tennessee Courts haven’t yet considered it, other jurisdictions with similar statutes have allowed recovery of fees where the lienor knowingly asserts lien claims on property that is not lienable. The statute certainly appears to provide recovery where a lien claimant asserts a lien that is invalid, such as an untimely claim.

Tennessee Courts follow the “American Rule,” meaning that a party can’t recover attorney fees unless they are provided for in a contract between the parties. If you are fighting with a lien claimant over an exaggerated or defective lien in Tennessee, consider turning the tables on them–ask for an award of attorneys fees.

Resources to Learn More About For Profit Student Loan Forgiveness

Student loans are a big problem for folks in the Middle Tennessee area. After I gave an interview on the “for profit” student loan forgiveness story last week, my phone started ringing off the hook.

One of the statements I made (which didn’t make the interview) was that a borrower who wants to make a forgiveness request may not need to hire a lawyer to help them with this process.

I mean, I love taking client money as much as the next lawyer, but there are resources online that you should review before talking to a lawyer.

I think the official Federal Student Aid website was a great resource. The site is written in good, clear text and contains a a link at the bottom, under the “How to Repay Your Loans” tab. The specific link is “Forgiveness, Cancellation, and Discharge.” This section contains a comprehensive “Frequently Asked Questions” section, as well links to the application to utilize the forgiveness process.

Lawyers are great and can be a benefit in any process like this. But, before you hire one, I’d suggest that you read the website and get an understanding of the issues first. Then, you know, bring in the big guns.

Loophole Under Federal Laws May Allow Some “For Profit” College Student Loans to be Forgiven

Last week, I talked to NewsChannel5 about a loophole under federal law that may allow borrowers to have their student loans forgiven, where they attended a “for profit” college that has either closed or made clearly false claims to attract students.

NewsChannel5

The law doesn’t apply to traditional colleges or universities, but, instead, to “for profit” colleges, a list of which can be found here.

These colleges generally target non-traditional students (i.e. older students with full time jobs), generally offer only night or online courses, and are known for advertising aggressively.

A great background “primer” on these issues can be found in “The Rise and Fall of For Profit Schools,” which suggests that the “advertising aggressively” part is the root of the trouble. Saying that “these schools made promises they couldn’t keep,” the article says that the industry may misrepresentations to get the attention of prospective students. This generally involves advertising inflated post-graduation job placement rates, misleading claims about potential future earnings, and lies about their faculty and facility quality.

With the economic downturn, as unemployed workers were looking for work and new job skills, those prospective students were the perfect marks for such alleged claims. Because many were unemployed or low income, the student body relied on federal student financial aid to pay the tuition.

The NewsChannel5 report drew from this Wall Street Journal article, which presented the shocking numbers of students availing themselves of the loan forgiveness process. Five years ago, the government had received only a handful of such requests; in the past 6 months, the story says, “more than 7,500 borrowers owing over $164 million have made applications.

Yikes.