All Those Great Recession Judgments May be Expiring Soon

Depending on who you ask, the “Great Recession” resulting from the subprime mortgage crisis began in December 2007 and lasted about two years. So, about ten years ago, I was spending most of my work days working on loan documents for third, fourth, and sometimes fifth mortgages for a local bank who was really, really late to the mortgage boom.

Of course, the impact of this past recession was felt for years afterwards, meaning my spring 2007 HELOCS didn’t go bad until 2010 or 2012. As a result, just a few years later, I was suing and taking judgments against those same borrowers. From 2008 to 2014, I estimate that I obtained at least 500 judgments, ranging in amounts from $2,500 to $5,000,000.

As I like to say, if you were hearing from me, it was bad news.

So, with a drawer full of judgments, this is what keeps me up at night: Those judgments are only valid for ten years, and, if I haven’t collected on them, they expire.

I’m taking about Tenn. Code Ann. § 28-3-110(a)(2), which provides that actions on judgments are only valid for ten years.

So, a good rule of thumb is that, if you received a judgment against someone you haven’t been able to collect in the last ten years, go back and confirm when you were awarded that judgment. If you’re getting close to the ten year mark, you might be running out of time.

(But, not to be too dramatic, I’m going to talk about how to extend that time period soon.)

 

 

General Sessions Court Refresher

One of the great things about blogging about esoteric issues that come up in my law practice is that, sometimes, I get to consult myself when a legal issue arises.

Like, right now, when I’m preparing for a Davidson County General Sessions trial that starts in an hour, and I’m trying to remember what Tennessee statute allows you to exceed the $25,000 jurisdictional limit in small claims court.

It’s Tenn. Code Ann. § 16-15-501, which allows you to exceed $25,000 in calculating a judgment, where the excess amount is comprised of attorneys fees (and/or court costs and/or discretionary costs).

So, thanks a lot, Creditor Rights 101.

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.

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.

Domestication of Federal Court Judgments: Really Easy

Four years ago, I talked about the process of domesticating a foreign judgment, which is the process by which a party makes a judgment of one state enforceable in a different state. Under each state’s version of the Uniform Enforcement of Foreign Judgments Act, I said, it’s a pretty easy process.

What I didn’t mention, however, is how much easier it is to enforce a judgment granted in Federal District Court in another District Court.

In the federal system, pursuant to 28 U.S.C. § 1963, all a plaintiff must do is record a certified copy of the final judgment in the other district. “A judgment so registered shall have the same effect as a judgment of the district court of the district where registered and may be enforced in like manner.”

To cut through the legalese, once you record your out-of-district, final judgment, it becomes enforceable immediately in the new district. There’s no need to serve a copy on the judgment debtor; there’s no 30 day response or objection period.

The reasoning behind this is simple. When you cross state lines, you take your judgment into a new jurisdiction, with a different state constitution and different laws. Under the federal court system, you’re not truly crossing any boundaries. And that’s a pretty powerful tool to keep in mind when deciding where to file an action against an out of state defendant.

Enforcement of Judgments on Out of State Debtors Made Easy: When the Debtor Comes to You

Four years ago, we talked about domestication of judgments. Long story short, a judgment awarded in Tennessee can only reach a debtor’s assets located inside the State of Tennessee. So, if you have a judgment against somebody who lives in Texas, you may have to file a second lawsuit in Texas to attach his assets.

But maybe not.

I mean, sure, if he owns land in Texas,  owns a car that’s registered in Texas, or has a million dollars in cash under his Texas bed, then your Tennessee judgment is not going to be effective to execute on those assets. To get those, you need to go through the domestication process, which results in your out of state judgment being recognized by that foreign state as a valid judgment for enforcement in that state.

But, here’s a trick: What if the debtor has all his assets in that foreign state, but he banks at a large bank with offices all over the country? And what if that bank has a branch in Tennessee? The answer is that you can levy on that bank account.

So, debtors with accounts at Wells Fargo and Bank of America, watch out.