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.

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.



Judgment Creditors can cross county lines in execution sales of real property, says TN Court of Appeals

Yesterday, the Tennessee Court of Appeals answered another longstanding creditor question: Whether a Court can order an execution sale on a debtor’s real property in a different county.

I get asked that all the time, and I’ve generally said you can. Now, I can cite the new opinion from the Court of Appeals in Ronald L. Jones v. Louise Helms, No. W2019-00864-COA-R3-CV, 2020 WL 6806372 (Tenn. Ct. App. Nov. 19, 2020).

The legal issue is whether the first county court has “subject matter jurisdiction” to order the sale of real property in another county. The Court looked first to Tenn. R. Civ. P. 69.07, which gives the judgment creditor a lien (per Rule 69.07(2) and provides that a creditor “may move for an order of sale. (per Rule 69.07(3)).” But, Rule 69.07 doesn’t provide any guidance on the process, procedure, or venue.

So, the question remains: In which county does the creditor make this request?

The Court wrote:

Rule 69.07(3) does not mandate which court or county a judgment creditor must file the motion in for the order of sale. Furthermore, circuit courts are courts of general jurisdiction, meaning that they have broad, rather than limited jurisdiction. Tenn. Code Ann. § 16-10-101 (“The circuit court is a court of general jurisdiction, and the judge of the circuit court shall administer right and justice according to law, in all cases where the jurisdiction is not conferred upon another tribunal.”). Therefore, it would appear that under the terms of the rule and the broad nature of the jurisdiction conferred upon circuit courts, Appellee was entitled to move for the order of sale in the circuit court for Gibson County. Indeed, it appears to be an accepted practice to file Rule 69.07 motions in circuit courts…. Moreover, Tennessee law generally provides that, with regard to sale of land for the payment of debts by decedents, courts of record “may decree a sale of lands lying in any part of the state.” Tenn. Code Ann. § 16-1-107.

The opinion makes fairly short order of this long-standing legal issue, and the certainty and procedure is good for creditors.

In the past, after my review of the chancery court statutes, I’d often wondered whether a court had jurisdiction to order and approve a sale of real property in a different county. I still have some lingering doubts whether a better challenge and legal argument in response could cast some doubt on this issue, particularly under the chancery jurisdiction statutes.

But, until then, save this opinion. It may save you having to file a Petition for Sheriff’s Sale in a different county to enforce your judgment.

Davidson County General Sessions Caps Dockets at 25 Cases: This is a Big Problem

Last week, the Davidson County General Sessions Court entered an Administrative Order that limited the number of cases that can be set on the civil dockets in Courtrooms 1A & 1B, with a cap of 25 cases per day (effective October 5, 2020).

That sounds like a lot of cases. It is not.

A typical General Sessions civil docket might have 50 to 100 cases on the docket. Davidson County has civil dockets every day of the week.

By my math, this represents a minimum 75% cut in capacity.

Granted, when I first heard about the 25 case limit, it didn’t sound like too much of a problem, since I don’t have a high volume consumer or residential eviction practice. The high volume lawyers who routinely have 25 of their own cases on each docket would be the ones with the problem, right?

Then, I got a call from a commercial landlord whose tenant hasn’t paid rent since March and has “gone dark.” The landlord asked me to get a judgment for possession as soon as possible.

Spoiler-alert: The 25 case limit is a problem.

Continue reading “Davidson County General Sessions Caps Dockets at 25 Cases: This is a Big Problem”

New Associates: These recent Tennessee Appellate Opinions can save you some research time.

Over the past few weeks, the Tennessee appellate courts have issued some really useful opinions on creditor-specific issues of law.

As you’ll remember from this post (from 2013!), these opinions have great recaps of the law and can save valuable research time. I’ve literally been sitting at counsel table, furiously researching this site for a citation (this one, about slow pay motions. And also this one about Rule 69.02.)

Some quick hits from the past week:

Statute of Limitations; when a breach of contract cause of action accrues; and the standard of review for a 12.02(6) motion. This case from yesterday, In re Estate of Donald Cowan, No. M2019-01597-COA-R3-CV (Tenn. Ct. App. Aug. 25, 2020) has a great statement of the law on statutes of limitation, when the clock starts ticking on a claim, and a good recap of the standards in granting a motion to dismiss for failure to state a claim upon which relief can be granted under Tennessee Rule of Civil Procedure 12.02(6).

It’s a well written opinion, and a litigant with those issues can literally cut and paste those sections into a brief.

Motions to Intervene under Tenn. Riv. Civ. P. 24. Regions Bank v. The Blumberg Trust, et. al., No. E202000051COAR3CV, 2020 WL 4919783 (Tenn. Ct. App. Aug. 21, 2020). This opinion, issued on Friday, has a great summary of the statutes and case law on Intervention as of Right and Permissive Intervention in Tennessee under Rule 24.

In that case, the party seeking to intervene was an assignee of the debt and was really only trying to substitute itself as a party, so it’s strange that intervention was even an issue.

In an even stranger twist, the prevailing party (appellee) most definitely submitted the Order Denying the Motion, and the submitted (and entered) trial court order was entirely devoid of factual or legal analysis. As a result, the Court of Appeals refused to rule on the issues on appeal and remanded the case for further proceedings.

My question is this: It was clearly a deficient bare-bones trial court order, but doesn’t the appellant share the responsibility of curating the record? Shouldn’t the appellant have submitted a competing order that had enough substantive details to properly present the issue on appeal?

Just a strange case.

Prejudgment Interest under Tenn. Code Ann. § 47-14-123. The Court of Appeals revisited the case of 101 Constr. Co. v. Hammet, No. M201801321COAR3CV, 2019 WL 5606610, at *7 (Tenn. Ct. App. Oct. 30, 2019), appeal denied (Mar. 26, 2020), and I can’t tell exactly why, but I appreciated the reminder about this case’s very detailed lesson about the importance of detailed communication in legal fee arrangements.

Also, it has a nearly “cut and paste” perfect discussion of the standards in Tennessee for awarding prejudgment interest under Tenn. Code Ann. § 47-14-123.

Spoiler: Tennessee Courts should always be awarding pre-judgment interest.

Elements to Determine Value of Damages under Quantum Meruit Claims (and who can testify). This is an issue that doesn’t show up in appellate cases often: what type of proof is required to establish the amount of damages in a quantum meruit claim.

The Court of Appeals provided a really good road map last Tuesday, in Blount Mem’l Hosp. v. Glasgow, No. E201900776COAR3CV, 2020 WL 4809951, at *2 (Tenn. Ct. App. Aug. 18, 2020).

The Plaintiff had an awful contract, so it had to rely on unjust enrichment/quantum meruit to recover the value of the hospital services provided to the Defendant. The Plaintiff presented proof from the “hospital’s financial representative” (not a doctor or service provider) that “she was familiar with the customary charges in the medical industry and that the hospital’s charges for the services were reasonable and customary.”

This knowledge wasn’t gleaned from a survey of the industry or by first hand knowledge of what other hospitals were charging; instead, it was based solely on what Medicare allowed hospitals to pay. (As an added note, though, the Court mentioned that the mere fact that “this is what the hospital usually charges” isn’t good enough proof.)

But, because the proof presented, i.e. that the “medical services were comparable to all hospitals in the area that accepted Medicare patients…,” was presented by a “hospital representative who is familiar with what is reasonable and customary,” the Court found that it was “sufficient to make [a] prima facie case for the reasonable value of the services rendered.” Id. at *3.

Keep this case for those situations where your witness is the controller / bookkeeper, but has no idea how to perform the underlying services. This comes up alot.

Last One: Setting Aside a Judgment Under Rule 60.03. Reese v. Amari, No. M201900329COAR3CV, 2020 WL 4342734 (Tenn. Ct. App. July 28, 2020).

This one is really interesting. A judgment debtor attacked a decades old judgment, arguing that it was a default judgment.

In denying the attack, the Court noted that, even though it was called a “default” judgment, the trial court actually entered the judgment at a trial, which the defendant didn’t attend. So, it wasn’t technically a default judgment, as that is defined under Tenn. R. Civ. P. 55, and wasn’t entitled to the more generous standards to set aside default judgments.

Separately, though, Judge Dinkins’ opinion has a very precise presentation of when a court will set aside a final judgment under Rule 60.02(3).

And, new associates, this comes up far more than you’d imagine.

Tennessee Court of Appeals issues opinion that resolves another obscure issue under Foreign Judgment Act.

Last year, I wrote a post called Judgment Creditors are Limited to the terms of their Foreign Judgments, which cited a Tennessee Court of Appeals case styled The Wolf Organization, Inc. v. TNG Contractors, LLC.

The point of that opinion was that a judgment creditor seeking to domesticate a foreign judgment under the Uniform Enforcement of Foreign Judgments Act (Tenn. Code Ann. §§ 26-6-101 to-108) would be limited to the actual amount of the foreign judgment. In Wolf, the issue was that the creditor was asking for the judgment amount plus more post-judgment attorney fees to be allowed. The Wolf Court said that the claim for additional attorney’s fees was a separate claim.

I appreciated this case, since it provided resolution of an obscure, but common, issue under the Tennessee Foreign Judgment Act.

Well, a little more than a year later, the Wolf litigants are back at it, with another interesting issue. The latest is Friday’s opinion, The Wolf Organization, Inc. v. TNG Contractors, LLC, M202000093COAR3CV (Tenn. App. Aug. 21, 2020).

The new issue? If the foreign judgment provides for a specific post-judgment rate of interest, but the Order enrolling the foreign judgment doesn’t mention interest, what happens?

The Court makes two useful observations:

  1. Regardless of whether the new Order says anything about post-judgment interest, all judgments are automatically entitled to post-judgment interest.
  2. But, in the absence of a specific statement or order about the amount of post-judgment interest in the enrollment Order, the rate of interest is just the Tennessee statutory rate, found at Tenn. Code Ann. § 47-14-121.

My take-aways from this opinion:

  1. Details matter. If you think you will need it in the future, include it in the text of the Order. An order from a court will always be the most important pleading you’ll draft, and a smart lawyer will think about all the things she will need from this order and work backwards.
  2. Are Orders always required? Under the Foreign Judgment statute, an order is not expressly required. Instead, under Tenn. R. Civ. P. 3A.04, the Clerk simply “enrolls” the original judgment after 30 days after service.

Sure, the Wolf creditor could have avoided all of this with a more detailed Order; could they have avoided all this by not filing any order? Maybe.

Also, following the first Wolf opinion, the creditor needed to go back to the other state to get an award of attorneys fees. Couldn’t the creditor also get a judgment for post-petition interest at the higher rate and then come back to Tennessee?

Either way, it’s an interesting case on a rarely litigated statutory scheme.

Will collection on unpaid private school tuition bills be a big news story in 2021? Probably.

In late July, I noticed the television ads by the Nashville Catholic Schools during the morning news, confidently advertising that their schools would be open for in-person classes the 2020-21 school year.

The first few times, I wondered if it was a coincidence that the ads were being rolled out while public schools were struggling with the decision of whether to re-open for in-person classes during the COVID pandemic.

Then, the weekend after public schools started their online-only reopening, the private schools’ messaging got a lot less subtle:

Gone were the images of sweet kids in their school uniforms.

These new ads featured a frustrated mom, dealing with a pesky kid with a tablet in her little hands, bothering the mom for help with school work while the mom tried to work from home. But, as the ad showed, once the mom signed her kid up and sent her off to in-person school at the private school, however, all was good.

At the end of the day, a private school is a business, right? This is a marketing technique called “FUD,” which means “fear, uncertainty and doubt” and is evoked intentionally in order to put a competitor at a disadvantage. In short, the private schools knew that public school parents were terrified about the start of the new school year, had no idea what to do, and the ads were deployed the weekend after Metro re-opened to provide some answers.

The campaign has worked in my neighborhood. My local school’s Parent-Teacher Organization has been decimated by defections. Seriously, I might be the new PTO president by default and not even realize it. We’ve had so many kids and their parents opt out of our (awesome) school.

But, as colleges across the country all over America are realizing this week, promises of in-person learning can be hard to keep.

As a collections lawyer, I have to wonder if parents, who were enticed by the promise of in-person learning, will be unhappy with their decision (and the exorbitant monthly tuition costs) if in-person classes are suspended. Will this unhappiness result in defaults in tuition payments?

During the last recession, I represented a handful of Nashville’s private schools in collection matters. It was not an easy task, as I wrote about in this 2011 blog post, More Than Just Legal Expense: The Unexpected Hassles of Pursuing Collection of Unpaid Debt. In that post, I said:

I was reminded of this [difficulty] when I read this [then recent] Tennessean article about lawsuits filed by Nashville private schools to collect on unpaid tuition. I was doubly reminded about the “hassle” part when I scanned the comments, with the schools’ dirty laundry getting aired for the world to see.

The school is perfectly within its rights to seek payment of past due amounts, but collections can bring out the worst in people, especially in this economy.

In 2009 and 2010, I issued a number of demand letters to parents for unpaid tuition, and, wowza, the responses I got were not pretty. The parents complained about everything imaginable. I sent probably 50 letters, but I talked the school out of filing any lawsuits. Life was too short to have to have to deal with those sorts of fights in small claims court.

So, if the promises of in-person schooling end up not coming true during the global pandemic, will parents pull their kids out? Maybe. Does the standard annual contract have a provision that keeps the parents obligated to repay the full tuition? Probably.

Should the school sue? See my 2011 post about that.

This will be a developing issue in 2021. This is the first time that many of those parents are incurring the $2,000 to $4,000 a month fees, and they may not have anticipated the huge budget impact it will have. If the pandemic takes a harder turn–whether it results in online only classes or even a parent’s job loss–will those parents be willing (or able) to stay enrolled and current on tuition?

How a Dispute over a CBGB documentary shows the dangers of not going to Court.

A few weeks ago, the New York Times told the story of filmmaker Amos Poe, who filmed historic shows at CBGB in New York City, getting footage of early shows by Blondie, Talking Heads, and the Ramones.

The article is titled “His Film Is a Punk Classic, but the Credits Now Roll Without Him,” and it’s not a happy story. In short, today, Poe gets hardly any credit for his visionary role in recognizing the significance of the time and the people he was shooting and creating what some call a classic punk rock story.

That’s because he lost his rights and ownership to the film to a business partner, in an unpaid debt lawsuit. Poe says that he couldn’t afford a lawyer and, in the end, “skipped the court date.” At trial, the Judge found the debt to be about $6,500 (but with $43,000 in legal fees).

During the collections process, the judgment creditor was able to sell the copyright (to itself) via an execution sale, including ownership of Poe’s four films (which sold for $10 each).

Per the New York Times, Debbie Harry commented “What a farce that anyone else should claim his inspirational film.”

Here, there are a number of take-aways.

First, what the judgment creditor did here was valid and allowed under collection law. A judgment creditor can seize all sorts of assets of the judgment debtor, including these intellectual property rights (which are treated as personal property under many states’ laws, including Tennessee).

Plus, the ultimate sales price was only a small fraction of the value of the property being sold, most likely because no bidders appeared at any asset sale–and the creditor got ownership for its very low opening bid.

Second, there were so many things Poe could have done to protect his assets. File a list of exemptions. Sell the IP rights himself. Go to court on his court date (which I called one of the worst mistakes a debtor can make).

It’s a sad story, but it happens every day for debtors all across the country.

Time is On Your Side: 4 Tips for Collections in a Sinking Economy

Things are looking bad for the economy, and there doesn’t appear to be any end in sight. As we enter Month Two of the COVID pandemic, banks and others creditors are bracing themselves for a very long winter.

I’m telling my creditor clients to be patient. While this good news doesn’t put money into hands today, here are some things I said the last time around, i.e. in 2010, that any creditor should bear in mind while we wait to see what the economy does.

There’s time to be patient.  In Tennessee, the statute of limitations for collection on an unpaid debt is six (6) years, pursuant to Tenn. Code Ann. § 28-3-109. Then, once you sue and obtain a judgment (within six years from the date of the default), your judgment is valid for ten years, pursuant to Tenn. Code Ann. § 28-3-110.  Plus, if your judgment remains unpaid at the end of the ten years, Tennessee judgments can be renewed pursuant to § 28-3-110 for another ten year period.

Don’t wait to act.  In some instances, it may make sense to take no action on unpaid debt. Maybe the customer is a company that has gone out of business and has no remaining assets, or maybe they’ve filed a liquidation bankruptcy.  This is where you make the “don’t throw good money after bad” decision and possibly decide to write this debt off.

But, remember, the first creditor to obtain a judgment is the first in line to seize assets. Granted, you could be the first in line and discover there are no assets, but you should nevertheless record your judgment as lien in the real property records. For less than $25 in filing fees, a creditor can record a certified copy of its judgment in any and all Tennessee counties where the debtor owns real property, and that judgment becomes a lien on any real property owned by the debtor.

Even if they don’t have any equity in their property today, the situation could well be different in ten years (judgment liens remain valid as long as the underlying judgment is valid). What’s more, your lien’s reach will capture any real property they obtain during the life of the lien. In the end, sooner or later, your debtor will have to deal with you, whether it be as part of a purchase of new property, a sale, or a refinance.

Bend, don’t break. Sometimes, it’s important to recognize when a debtor truly lacks any assets to pay toward your debt. When this is the case, aggressive collections—whether it be seizing a work truck or all funds out of a bank account—may put that debtor out of business and, possibly, into a bankruptcy filing. A judgment creditor can take depositions and request financials from their debtor, and this information may assist you in determining whether they aren’t paying anybody…or just aren’t paying you.

Bankruptcy doesn’t mean the process is over.  If your debtor does file a bankruptcy case, there’s still a chance of monetary recovery. In addition to the benefits to the debtor, the secondary point of the bankruptcy process is to maximize return for creditors prior to granting the debtor a discharge of his or her debts. But, in most instances, a creditor in bankruptcy only receives pennies on the dollar in the process.

Keep in mind, however, the success rate in Chapter 13 bankruptcy cases (where debtors repay a percentage of their debts over 3 to 5 years) can be as low as 20%, meaning that most of those cases end with a dismissal. A dismissal is good for a creditor, because there is no discharge of the debt. Instead, the full amount remains due and owing. Debts are eliminated only when debtors receive a “discharge.” That’s an important distinction to know.

Finally, remember that a bankruptcy discharge only discharges “debts”—not “lien” rights. So, if you’ve already obtained a judgment and recorded it as a lien, then your lien on the debtor’s property survives the bankruptcy discharge. As a result, even though you can’t collect your debt, you can enforce your lien in the event of an attempted sale or refinance.

In the end, collection is a process that rewards the patient, especially in a struggling economy. But, a successful creditor must be prepared, and being prepared means having a valid judgment in place and exhausting all enforcement remedies before giving up. It may be a long road to recovery, but, if a creditor is smart and strategic now, the steps you take today will help make sure you’re paid in the future.