Good Article on Tennessee’s Post-Foreclosure Deficiency Statute

This month’s Tennessee Bar Association Journal has a good article on the new post-foreclosure deficiency statute, Tenn. Code Ann. § 35-5-118, titled “Deficiency Judgments after Foreclosure Sales.”

The article provides a detailed review of the cases construing that very ambiguous statute, which was enacted in 2010 and became effective September 1, 2010. Here’s what I wrote about the new law, back in 2010.

As you’ll recall, I litigated and won the first ever case construing the new law, in December 2012. My case was the GreenBank v. Sterling Ventures case, which is analyzed in the article.

If you’re a banker, a bank lawyer, or a defense lawyer helping some borrower clients, be sure to look at this article. It’s a weird law, and, as the last few paragraphs of the article suggest, there’s still a lot of things that are unknown/unclear about how Tennessee courts are going to apply it in the future.

 

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Highlights from the Creditors Practice Annual Forum 2018: Stay Relief Violations

Last month, I taught a session at the Tennessee Bar Association’s Creditors Practice Annual Forum 2018.  My section was called “Litigating Stay Violations.”

The CLE was on September 26, 2018, so, sorry, you missed it. But, to get more mileage out of the materials I prepared, I’m going to post some of the info here.

First off, the automatic stay at 11 U.S.C. § 362 operates as a stay of most collection activity against the debtor in bankruptcy.

When the stay is violated, 11 U.S.C. § 362(k) comes into play, which provides in part that “an individual injured by any willful violation of a stay provided by this section shall recover actual damages, including costs and attorneys’ fees, and, in appropriate circumstances, may recover punitive damages.”

And, no, a violation doesn’t have to mean that the creditor had bad intent.

Actually, a willful violation of the automatic stay requires only that: (i) the creditor knew of the stay and (ii) acted intentionally in violation of the stay. TranSouth Financial Corp. v. Sharon (In re  Sharon), 234 B.R. 676, 687 (B.A.P. 6th Cir. 1999). “[P]roof of a specific intent to violate the stay” is not required, but instead only “an intentional violation by a party aware of the bankruptcy filing.” Id.

Basically, the debtor has to prove that the creditor had notice of the Bankruptcy and took intentional action that violated the stay. Long story short, it’s not a high bar to prove those factors.

Tennesee Legislature Expands Hours for Foreclosures

It’s always a surprise when I take a quick glance at a statute and discover a discrete, subtle change.

For instance, today, I was scheduling a foreclosure sale.

For years, the statute on “when” you could conduct the sale (Tenn. Code Ann.  § 35-5-109) has said that a sale can be made on “any day Monday through Saturday” and “between the hours of ten o’clock a.m. (10:00 a.m.) and four o’clock p.m. (4:00 p.m.)” (excluding state or federal legal holidays).

Apparently, in 2017, the legislature changed Tenn. Code Ann. § 35-5-109 to expand the time of day you can do a sale. Now, you can conduct sales “between the hours of nine o’clock a.m. (9:00 a.m.) and seven o’clock p.m. (7:00 p.m.).”

Sometimes, the legislature works in mysterious ways. I have no idea why this was law was changed.

I understand the utility of allowing sales earlier in the day, but why allow them to be as late as 7pm at night? Who demanded this?

Oh well. I guess the good news is that I can coordinate my future foreclosures in Shelby County with the tip off for a Memphis Grizzlies game.

Will an Adversary Proceeding Survive the Dismissal of the Bankruptcy Case? Maybe.

Eight years ago (8 years! You are reading a law blog that has lasted for 8 years!), I talked about the difference between a bankruptcy discharge and a dismissal.

The tl;dr version for creditors? Discharge is bad; dismissal is good.

But, what if you’re a creditor and the debtor has filed an adversary proceeding against you, but then the bankruptcy case is dismissed?

The tl;dr version? It depends.

Generally, the dismissal of the underlying bankruptcy case results in the dismissal of related adversary proceedings because federal jurisdiction is “premised upon the nexus between the underlying bankruptcy case and the related proceedings.” But, there are exceptions.

One such exception is for proceedings to enforce sanctions and contempt for violation of the automatic stay. A Bankruptcy Court will retain jurisdiction “for the purpose of vindicating the court’s own authority and to enforce its own orders.” See In re Bankston, 1:12-BK-14022-SDR, 2015 WL 6126440, at *2 (Bankr. E.D. Tenn. Oct. 15, 2015)

Basically, the reasoning goes, an action for contempt of court resulting from a party’s blatant disregard of the Bankruptcy Code and the authority of the Bankruptcy Court is something that the Bankruptcy Court takes very seriously and will enforce, independent of whether the underlying case still exists.

The reasoning is different for other types of proceedings that are dependent on the underlying case, like actions to recover avoidance preferences.

 

Courts Revisit, and Affirm, Requirement of Possessory Bond in Eviction Appeals

Here’s a  quick reminder about appeals of detainer and eviction judgments in Tennessee.

Remember, a tenant who loses in General Sessions  has the right to appeal that detainer judgment. But, in order to retain the property, that tenant has to post a bond equal to one year’s rental value of the real property.

But, what if the tenant files an appeal and doesn’t post that giant bond (or otherwise find a dummy to sign off on the bond as surety)?

The Tennessee Supreme Court waded into these waters in an opinion from December 2013 and said that a detainer appeal without the “one year rent” bond is still an effective appeal, but it doesn’t help the defendant in any way in keeping the property.

Earlier in the summer, the Tennessee Court of Appeals issued another opinion on that issue. In that opinion, the Court noted that the appeal bond requirement to retain possession applies to appeals as noted under Tenn. Code Ann. § 29-18-130(b)(2), as well as petitions for writs of certiorari under Tenn. Code Ann. § 29-18-129.

This is an obscure part of the law, but lots of Courts are covering this ground and reaching the same conclusion.

Last note: If the tenant is only appealing the monetary part of the judgment, no possessory bond is needed to have an effective appeal.

7% and Rising: Tennessee’s Post-Judgment Interest Rate Continues to Go Up

About this time last year, I noted that the statutory rate of interest on Tennessee judgments was continuing to increase.  At the time, the rate was 6.25%.

After bumping up to 6.5% in January 2018, it has now risen again to 7.0% (effective July 1, 2018).

As you’ll recall from my post in February 2013, Tennessee switched from a flat-rate of 10% to a variable rate under the (then) new version of Tenn. Code Ann. § 47-14-121.

As a creditor, this is great news. As a creditor lawyer, it’s kind of a pain in the neck.

Now, when I’m asked to prepare a payoff, I have to check the Tennessee Administrative Office of the Courts website to see what the applicable rate is. Then, for any increases or decreases, I have to adjust my math for that time period.

Come See Me, an “All-Star”, Talk on Ethical Online Marketing in November

I’ve gotten a little stingy about my availability for speaking engagements. Long story short, it’s sort of a pain in the neck.

But, I agreed to teach for the Tennessee Attorneys Memo group, because they have the best marketing materials. Specifically, they lead with the line: “The 12th Annual Tennessee Law Conference boasts an all-star cast of prominent Tennessee judges and attorneys, featuring David Anthony, Gail Ashworth, and James Bryan Moseley.”

So, if you give me top billing and refer to me as an all-star, I’m there.

I’m teaching on November 15, 2018, for the section titled “Ethical Online Marketing.” This is a “dual” credit course, meaning you’ll get ethics and general CLE credit. Plus, I am probably the most prolific blogging, tweeting,  and social media’ing lawyer in town. (Edited: Since publishing this post, this assertion has been questioned by a local attorney.)

The real challenge will be keeping people in their seats and paying attention at 4pm, so I plan to super-charge this talk with lots of examples of terrible and/or unethical online marketing examples.