David

Davidson County Chancery Court Case and Pleading Access Online

Last year, I noted that the Davidson County Chancery Court had started a service that showed case dockets online. This Chancery Court Public Records Access site provided the names and dates of filings, but not copies of the actual pleadings. Last year, I predicted that electronic copies of pleadings can’t be far behind.

I was right. Now, the Chancery Court has a second site, called Chancery Information Access, on which you can actually view copies of pleadings. It is a subscription service. Here is information on how to register.

It costs $15 a month. If you think that’s expensive, well, wait until you need a copy of pleading and have to walk to the Courthouse to get it.

Now, I’m hoping that the next step will be for Chancery Court to accept remote electronic filing of pleadings.

The Wisdom of the Six D’s of Debt Collection

I learned today about the passing of Art Willard, a well known and well liked banker and special assets officer in the Nashville area with whom I worked on many deals in Bankruptcy Court, in Chancery Court, and at the auction yard.

As a banker, Art was the kind of guy you’d want collecting your debts, because he was smart, tenacious, and could smell money a mile away. As a borrower, Art was the kind of guy you wanted coming after you, because he was smart and knew when a proposal was the best deal he’d get.

In Bankruptcy Court a few years ago, Art and I sat and sat, waiting for a big case to get called. I heard stories of him accepting monthly payments of fifty cents on a Judgment and repossessing airplanes. I also learned the 6 D’s of Debt Collection.

2012 Tennessee Legislature is Considering an Absolute Homestead that Would Eliminate a Creditor’s Ability to Collect Against Residential Real Property

Recording a judgment in the county’s Register of Deed’s Office creates a lien on any real property owned in that county by the Debtor pursuant to Tenn. Code Ann. § 25-5-101.

A judgment lien is the single most effective tool in the collection process. Plus, it’s cheap: for less than $20, a creditor can get a lien on any property owned (or owned in the future) by the Debtor, and that property cannot be sold, refinanced, or transferred without dealing with the creditor.

As a creditor rights lawyer, you can guess my concern over two Bills being considered by the Tennessee Legislature in 2012, House Bill 2887 by Glen Casada and HB 2930 by Mike Bell.

These Bills seek increase the “homestead” exemption in Tennessee. “Exemptions” allow a debtor to protect certain property from the reach of creditors. Exemptions are designed so that a judgment creditor can’t take everything, so household goods, retirement accounts, and other necessities can be exempted.

H.B. 2887 proposes an absolute exemption that would exempt a debtor’s residence from any execution or judicial sale. Essentially, no matter how much equity a debtor has in his or her house, that equity would be completely untouchable by creditors. A debtor could live in a $1,000,000 lien-free house without paying a penny to creditors. This legislation would completely abolish the concept of a judgment lien.

Currently, Tenn. Code Ann. § 26-2-301 allows a single individual to exempt $5,000 of equity, a married couple $7,500, and a married couple with minor children living in the house up to $50,000.

The other proposed legislation, HB 2930 by Mike Bell, seeks to simply increase the homestead exemption amount to $50,000 across the board.

From a creditor’s perspective, the proposed legislation is both too broad and unfair. I understand the importance of protecting peoples’ homes, but, at the same time, the law should operate fairly as to creditors and debtors.

Frankly, I think it’s unfair that the law would shield $50,000 of equity from the reach of creditors. Think about it from a creditor’s perspective: if you loaned somebody $200,000 and weren’t getting paid any of it, wouldn’t you be mad to see them keep $50,000 of equity?

Your Next Landlord Could be A Hedgefund: Are Rental Properties Making a Comeback as a Good Investment?

I’ve said for years that the contractors and investors who got burned by the economic downturn will eventually hit rock bottom, dust themselves off, and end up making as much money on the backside of the recession as they lost on the front end. This is because the same market inefficiencies that were exploited in the past are being replaced by equally exploitable new ones.

The builders who once built speculative homes on inflated market appraisals are going to be the contractors who do the work for the investors who buy the properties from the banks at 40 cents on the dollar.

The Las Vegas Sun did a story last week on how hedge funds are buying Las Vegas real properties at bargain rates, making minimal investments/improvements, and renting the properties for an 8% to 12% annual return. Then, once the economy rebounds, the investors could expect appreciation to add more value to the investment.

As far as investments go, being a landlord is fairly labor-intensive. And, if the past 4 years has shown us anything, it’s hardly a fool-proof move.

Potential landlords would be smart to read this excellent article in the Wall Street Journal, Do You Really Want to be Landlord? The article has both horror stories and advice, as well as a forecast that rents are likely to increase over the next few years.

I got out of the landlord business two years ago, when my tenant couldn’t unclog her drains and called me every other day. The 30 minute drive, coupled with time spent waiting on plumbers, gave me all the time to reconsider the pros and cons.

Two Signatures Not Required: New Tennessee Supreme Court Decision Finds Personal Guarantees will be Enforced by Their Clear Text

Lately (i.e. in this economy), I’m constantly fighting over the enforceability of personal guarantees.

A personal guarantee is an agreement by which a third party agrees to personally repay another person’s/corporation’s debt. When a corporate entity doesn’t have a credit history or sufficient assets, a lender will generally ask for an individual to personally guarantee the debt. Creditors, obviously, want guarantees, because more parties obligated to repay your debt increases your chances for repayment. If a creditor files a lawsuit, it can obtain a judgment for the debt against all of the guarantors.

With the rise in defaults, guarantors are getting sued more than ever before. Their only defense is to attack the guarantee, and, as a result, the text of these agreements is constantly being tested. A common issue relates to the signature line(s): if a corporation’s president signs a contract that contains guarantee language, does the president need to sign twice, both as “Bob Smith, President” and then a second time as “Bob Smith?”

In the past, the overwhelming outcome was that there needed to be two signatures–one from the President and one from the Individual.

So, in that context, you’ll understand why I liked the recent Tennessee Supreme Court case of 84 Lumber Company v. Bryan Smith (Dec. 12, 2011). There, the Supreme Court looked only at the text of the contract. That text clearly said that the person signing the contract for the corporation was also personally obligating himself to serve as the guarantor. When the text is crystal clear, it doesn’t matter that there is only one signature.

So, even though the only signature on the contract was by ““R. Bryan Smith, President,” the Court said “[t]he explicit and unambiguous language of the contract points to only one conclusion: Mr. Smith agreed to be personally responsible for the amounts due on the account.”

A good practice would still be to get two signatures, but, in light of this case, it’s certainly not fatal to only have one signature.

Erin Andrews files Lawsuit for Invasion of Privacy in Nashville Circuit Court

If you’re a sports fan, you know Erin Andrews. You’ve probably also heard that a stalker allegedly followed her across the country, asked to be placed in the room next to her in various hotels, and took unauthorized video footage of her in her room.

One of these instances occurred while Ms. Andrews was in Nashville, covering a Vanderbilt Commodores football game in September 2008.

On Thursday, December 1, 2011, Ms. Andrews filed a lawsuit against the hotel and others for invasion of privacy, negligence, and negligent infliction of emotional distress.

Attached is a copy of the Complaint filed by Erin Andrews in Davidson County Circuit Court. See Erin Andrews Complaint.

Collection Advice for Lawyers: Use Detailed Invoices as a Way to Justify your Fees and Get Paid

I received a collection notice in the mail last week, from a Georgia law firm that domesticated a judgment for one of my Tennessee bank clients. I had subconsciously sat on their invoice for a month, mainly because I hated their invoice and didn’t want to forward it to my client.

It wasn’t for a lot of money, but I hated it because it didn’t tell a compelling story showing the value my client received.

The invoice didn’t have the hourly rate of the person providing services. The time spent for each task wasn’t itemized. The invoice provided only minimal details about the work provided. In short, it didn’t prove that value was given, and it didn’t tell a story.

If a lawyer is ever going to advocate, the time is when he’s asking to be paid. When I send out a bill, I always keep in mind:

Always provide (too much) detailed information about the work you do for a client on a bill. Leave the client no question that they are getting lots of great legal work.
Include all the “technical” information on the invoice, showing how much time is spent on each task, who performed it, and how much was charged for the task.
Most important, craft your time entries in a matter that tells a story, which will show the client the value of your time.

Compare: the below one (1.0) hour billing entries:

“Legal Research on jurisdiction”

“Legal Research in Tennessee statutes and cases on issues related to Delaware corporation doing business in Tennessee and whether internet website justifies lawsuit filed in Tennessee”

Which one is more likely to be paid?

Joe Paterno’s Estate Planning Sure Sounds like a Fraudulent Conveyance

Amid all of the Penn State mess, the discussion is shifting from potential criminal liability to civil liability, as victims are talking to lawyers about filing civil lawsuits to recover monetary damages.

Recently, the New York Times reported that Penn State coach Joe Paterno transferred full ownership of his house to his wife, Sue, for $1.00 (and for “love and affection”) in July 2011 (4 months before the scandal was publicly reported). The local taxing authorities place the value of the house at nearly $594,484.40. Lawyers for Paterno say that the transfer was simply an estate planning tool.

If you had read my post about fraudulent transfers, however, you might wonder if the transfer was made with an eye toward getting valuable assets out of Paterno’s name and into the name of somebody who would not be named in litigation (i.e. where someone with a judgment against Mr. Paterno couldn’t reach it).

Lawyers often urge clients to make similar transfers, especially when faced with lawsuits. “What’s the harm,” they might say, because, maybe, the creditors will not notice it or four years will pass. If discovered, the “fix” might be to simply convey the property back, right?

Not always. Here’s the downside: a crafty collections lawyer won’t just ask to set aside the transfer; instead, the creditor would ask that it be awarded a monetary judgment against the transferee of the property, a judgment in the amount of the value fraudulently given.

So, in the Paterno case, that plaintiff would ask for a money judgment against Mrs. Paterno for $594,483.40, which is the value of the property, minus the $1.00 Mrs. Paterno paid. Mrs. Paterno has never been named as a potential civil defendant in any of the potential lawsuits, but this $1 transfer certainly opens that discussion.

The lesson here is to be careful about being the recipient of somebody else’s estate (or asset protection) planning. They might drag you down with them.

Tennessee Attorneys Memo Hosts 5th Annual Law Conference for Tennessee Practitioners: November 3 and 4, 2011

The Tennessee Attorneys Memo recently hosted the 5th Annual Law Conference for Tennessee Practitioners, which is always a great and well attended event.

I spoke on Judgment Enforcement: Techniques, Common Roadblocks, and Advanced Strategies.

My favorite thing about this seminar is that, citing to the promotional materials, I can claim to be part of “an all-star cast of prominent Tennessee judges and attorneys.”

Construction Lenders: Don’t Wait to Visit the Construction Site to Check the Status of Work Progress

Not too long ago, even bad loans got repaid. With so much new money in the pipeline and refinance transactions always around the corner, errors in loan documents or lapses in lending oversight didn’t matter, because undiscovered issues never had time to blossom into problems. As a result, some lenders got lazy.

As this story from Memphis’ Commercial Appeal shows, Rusty Hyneman’s banker was really lazy. The worst part is the bank didn’t catch the issues until after approving the loans and, worse, advancing an incredible amount of money. When the bank did some basic post-transaction due diligence, the horses were already out of the barn.

After a customary review of active loans, the banker “hit the road to eyeball properties.” On this random visit to the construction site–11 months after loaning a total of $14 million–the banker must have been shocked to find that absolutely no work was being done on the project. Nothing.

That’s when the bank knew, obviously, there was a problem.

Here’s my advice to creditors: Take time to know your customers and know their projects. On a construction loan, occasionally drive past and make sure work is being done. Especially if you are actively advancing money to fund work at the site. Here, $4.9 million of the bank’s advances were to be used exclusively for construction at the project, and a quick drive-by could have saved millions of dollars.