Does Tenn. Code Ann. § 47-14-103 Impose a Ceiling on Interest Where the Note says “Maximum Rate Allowed”? (No.)

A few weeks ago, I got a call from a lawyer who was staring at a Judgment submitted by opposing counsel. The Judgment provided for post-judgment interest at 10%, which immediately made the lawyer think: Didn’t they lower the post-judgment interest rate in Tennessee? (They did ).

But, this Judgment recited that the underlying note provided for interest at the “maximum rate allowed under law,” which the Judgment defined as 10%, pursuant to Tenn. Code Ann.  § 47-14-103.

That statute, titled “Maximum Rate of Interest,” provides:

Except as otherwise expressly provided by this chapter or by other statutes, the maximum effective rates of interest are as follows:

(1) For all transactions in which other statutes fix a maximum effective rate of interest for particular categories of creditors, lenders, or transactions, the rate so fixed;
(2) For all written contracts, including obligations issued by or on behalf of the state of Tennessee, any county, municipality, or district in the state, or any agency, authority, branch, bureau, commission, corporation, department, or instrumentality thereof, signed by the party to be charged, and not subject to subdivision (1), the applicable formula rate; and
(3) For all other transactions, ten percent (10%) per annum.

So, the Judgment creditor apparently reasoned, 10% was the “cap” to the interest rate, where the note didn’t expressly state a maximum rate in numerical form. This was the basic holding in a 2005 case, McNeil v. Nofal, 185 S.W.3d 402, 414 (Tenn. Ct. App. 2005).

I haven’t seen this particular issue before. I think it’s incorrect. My stance is that subpart (1) to the statute protects banks who are proceeding on a promissory note. The full reasoning is laid out in a 2008 case, Foster Bus. Park, LLC v. J & B Inv., LLC, 269 S.W.3d 50, 55 (Tenn. Ct. App. 2008).

But, long story short, lawyers make money when there’s a split of authority that leaves a little crack in the door for creative arguments. And this statute and the 2005 case open the door a little bit.

At the end of all this, my primary surprise was that the creditor’s lawyer was effectively conceding the issue by self-imposing a 10% cap. When in doubt (and assuming you represent the bank), I vote for the 24% rate of interest.

New Tennessee Opinion Reviews Law on Motions for Recusals: Sets High Bar for Proof

A good rule of thumb for determining if a lawsuit has come off the rails is if one of the litigants files a Motion for the judge in the case to recuse himself. That’s a motion saying, essentially, that this particular judge is so biased against one party that the judge can’t rule fairly in the case.

I’ve been asked to file these in the past, and I always refuse because, if you attack a judge’s impartiality and you lose, then you’re stuck with that same judge. 

So, I read this Tennessee Court of Appeals case from last week with some interest, because it is the first time I’ve seen the law on recusal motions spelled out with this much detail. And, of course, it’s in a divorce proceeding, where emotion runs high.  (Side note: This is a completely insane divorce–login to Davidson County CASELINK and look at the pleadings. God help us all.)

In the decision, the Court focuses on whether the trial court entered the proceedings with a bias, such that it “prejudged” the litigants based on “interest, partiality, or favor” resulting “from extrajudicial sources and not from events or observations during litigation of a case.” Mere adverse rulings are not enough to justify recusal.

Nine times of out ten, a motion for recusal is filed by a party who is losing the lawsuit, and they equate the judge ruling against them as the judge being biased. This new opinion supports the position that they are not the same. Most of the time, the judge will rule against a party because they’re wrong, not because the judge doesn’t like them.

The $25,000 General Sessions Judgment Limits May Apply on Appeal, Unless the Claims are Amended

I enjoy practice in General Sessions Courts. Once you get past the utter chaos, unpredictability, and potentially long lines at the elevators, you may be able to obtain an enforceable judgment in less than 4-6 weeks after filing your lawsuit. That’s the fastest justice in the State.

Remember, though, that the monetary limit in General Sessions is $25,000.

Given the speed advantages, some lawyers will sue for a lesser amount to have their lawsuits heard in Sessions (i.e. the debt is $27,0000, and they sue for $24,999.99).  Then, if they lose the case or if it’s appealed to Circuit Court, the lawyers know they can always increase the action to the full amount in Circuit Court.

Such amendments are allowed under Tenn. Code Ann. § 16-15-729, which says the Circuit Court “shall allow all amendments in the form of action, the parties thereto, or the statement of the cause of action, necessary to reach the merits, upon such terms as may be deemed just and proper. The trial shall be de novo, including damages.”

But, don’t think the informality of Sessions practice carries over into Circuit Court.  The Tennessee Supreme Court’s opinion in Brown v. Roland, 357 S.W.3d 614, 616 (Tenn. 2012) held that a party is limited to their damages sought until and unless an actual amendment is made to the complaint. 
This is an interesting case, because, by implication, an amended complaint may also be required to add parties and causes of action.
In Sessions Court, it can feel like “anything goes.” It’s not a court of record, and the Judges let litigants have some procedural leeway in presenting their claims. Under the Brown case, that leeway stops upon appeal.

There’s a 15 Day Limit to Continuances in Tennessee Detainer Actions

Landlording is a hard business. If you don’t think so, wait until the first time you have to sue your tenant to evict them.

In Tennessee, the process is done by a “detainer” warrant, and it’s a full blown court proceeding, which is generally done in General Sessions Court.

In these proceedings, the landlord wants the proceeding resolved as soon as possible, while the tenant wants to stretch out the proceeding as long as possible. Who doesn’t like to live rent free, right?

Tenn. Code Ann. § 29-18-118 provides some protection for landlords. That statute allows the judge to continue a matter, but only to a time not exceeding 15 days.

The only exception the statute provides that would allow for a longer period of time is: (1) if the parties agree to a longer time; (2) the 15 days ends at a time when there’s no court; or (3) the party asking for the continuance pays “the costs.” (Here, the costs means they pay, at the time of the request, the rent due for that period, plus any other amounts due/incurred during that period.)

So, the tenant might get a delay–note that the statute isn’t absolute, it says “may”–but there’s an absolute limit to the delay. No Tennessee case–published or unpublished–provides any exception that allows for a longer continuance to this statute.