Construction Lawyers Rejoice! Tennessee Legislature Proposes Amendment to Fix the “Invalid” Lien Law

A few weeks ago, I wrote about Tenn. Code Ann. § 66-21-108, a fairly new statute that I called the scariest statute I’ve seen in long time.

This statute imposes strict liability and double / triple / quadruple penalties upon lien claimants who lose a lien challenge. As enacted, the statute didn’t draw any distinctions between good faith lien claims and fraudulent claims.

In short, if you lose any lien challenge, you lose big.

My concern was that this would have a chilling effect on Tennessee lien claims. Honestly, I was going to be nervous every time I filed a future mechanic’s lien, no matter how good my factual and legal basis was. You just never know what can happen in Court.

So, it was no surprise when I saw that House Judiciary Committee Chair Rep. Michael Curcio, R-Dickson, and Sen. Todd Gardenhire, R-Chattanooga, introduced a bill this week that was drafted by the Tennessee Bar Association’s Construction Law Section to fix this.

This proposed legislation HB875/SB682 adds a “malice” requirement when imposing penalties. Specifically, the big change comes in subpart (a), which provides:

“…a real property owner who prevails in an action challenging the validity of a lien, and establishes, by clear and convincing evidence, that the person claiming the lien has acted with malice, including in a libel of title proceeding, may recover: …”

I’m disappointed that I wasn’t able to use this statute on somebody, but it’s a small price to pay in order to avoid somebody using it on me.

Employers, Banks, and Creditors: Here’s What Happens Immediately After Service of a Garnishment (Per Rule 69.05)

When an employer or company receives a garnishment, they are generally confused as to what to do next. Granted, there is very small print on the backside of the form that purports to provide instructions. Good luck reading, much less understanding, that text.

As a legal matter, Tenn. Rule Civ. P. 69.05 is designed to provide the actual, “legal” instructions to the garnishee. Specifically, Rule 69.05(3) imposes the following timeline for compliance:

Step One: Next Business Day After Service: “…ascertain whether the garnishee holds property of the debtor. If so, the garnishee shall mail one copy of the writ of garnishment with the notice to the last known address of the judgment debtor. Where the garnishee is a financial institution, the balance in the judgment debtor’s accounts on the night of the service date is the amount subject to that garnishment writ.”

Step Two: Within Ten Days of Service: “…file a written answer with the court accounting for any property of the judgment debtor held by the garnishee.”

Step Three: Within Thirty Days of Service: “…file with the court any money or wages (minus statutory exemptions) otherwise payable to the judgment debtor. If the garnishee holds property other than money or wages, a judgment may be entered for that property and a writ of execution may issue against the garnishee.”

Rule 69.05(3) has some fairly dense text (i.e. it says a lot of things in a short amount of space). Here’s a few quick take-aways.

  • First, where you’re dealing with a bank, timing is everything. A creditor will want to time their garnishment to maximize the recovery. Knowing that the amount is determined “on the night of the service date” is useful information.
  • Next, if the creditor is seeking “property other than money or wages,” the rule allows for the entry of a judgment for that property, with a writ of execution to issue. This would be where a garnishee is holding personal property, choses in action, or a judgment. This subsection suggests a very efficient “turn-over” procedure for that type of property.

One issue the creditor will have is that there are other statutes, court precedent, and local rules that deal with these same issues. Per the Advisory Commission Comment, the intent here was to “consolidate procedures…into a single orderly rule.”

So, when in doubt, follow Rule 69.05.

May the Lawsuit Filed Against You be an Interpleader Complaint

Today’s post is just a quick follow-up to one from a few years ago.

That post, titled Interpleaders: The Only Time People Like to Hear from Me, discussed what an interpleader action is, why a bank/creditor would file an interpleader, and, most importantly, why it’s good news to receive one.

With it being the start of the year, a lot of banks and law firms are dealing with escrow and trust account balances, and trying to resolve those balances (i.e. pay the funds out). If those funds relate to a foreclosure and the foreclosing bank or trustee isn’t sure who is the proper party to send them to, they’ll probably file a Complaint in Interpleader.

So, to those of you who have had property foreclosed on in 2018 and now the bank has filed a lawsuit, there’s a chance that the lawsuit is good news.

A small chance, but there’s always hope.

Tenn. Code Ann. § 66-21-108 is the Scariest Statute I’ve Seen in a While (and I can’t wait to use it)

On May 21, 2018, the Legislature enacted a law related to real property lien disputes with some real teeth. (When I say “teeth,” I’m picturing the movie poster for Jaws.)

That statute is Tenn. Code Ann. § 66-21-108.

The law provides that, if a real property owner prevails in challenging a lien, the owner “shall recover” all of the following:

  1. The owner’s reasonable attorney’s fees; AND
  2. Reasonable costs incurred by the owner to challenge the validity of the lien; AND
  3. Liquidated damages in an amount equal to ten percent (10%) of the fair market value of the property not to exceed one hundred thousand dollars ($100,000); AND
  4. Any actual damages incurred by the owner.

What’s significant about this statute is all the punishments it awards a party losing a lien dispute. It creates a statutory basis for attorneys fees (remember, Tennessee is an “American Rule” state) and also creates a statutory basis for pretty hefty liquidated damages (remember, Tennessee courts don’t favor liquidated damages provisions).

And, in case that’s not enough, don’t overlook that this statute imposes these double penalties on a “strict liability” basis, meaning that there needs to be no showing of bad faith. Instead, all that the property owner needs to do is: (1) prevail; and (2) ask for all these damages.

So, if you’re the property owner, you’ll love this statute. If you’re a contractor or represent lien claimants, I suspect you’re going to think twice (and maybe more) about this statute every time you file a lien claim.

In Order to Be Granted Summary Judgment on a Claim, a Party Must File a Motion

In Chancery Court litigation, when I’m the movant on a motion for summary judgment, I sometimes describe my potential outcomes as “Win” or “Not Win.”

In short, I’m either going to win my case on summary grounds or not, but, as the moving party, I’m not going to lose the case, unless the other side files their own “counter” motion seeking summary judgment.

The Tennessee Court of Appeals issued an opinion yesterday that confirms this, at Adrian Lynn McWilliams, et. al. v. Brenda Vaughn, et. al. (No. E2017-01942-COA-R3-CV,  Tenn. Ct. App. Jan. 23, 2019).

In that opinion, the Court wrote that, when faced with cross-motions for summary judgment, “a court must rule independently on each motion and determine, with regard to each motion, whether disputes of material fact with regard to that motion exist.” Savage v. City of Memphis, 464 S.W.3d 326, 332 (Tenn. Ct. App. 2015) (citing CAO Holdings, Inc. v. Trost, 333 S.W.3d 73, 82 (Tenn. 2010)). Further, “the denial of one party’s motion for summary judgment does not necessarily imply that the other party’s motion should be granted.” Id. Rather, when considering cross-motions for summary judgment, the court must determine whether each party is “independently entitled to summary judgment.” Id.

To be clear, where one party’s motion for summary judgment is denied does not necessarily mean that the other party is entitled to prevail, even if they filed their own motion. Id. That’s because there are all kinds of factors that go into whether to grant or deny a summary judgment motion.

But, the Court went on to note, where the other side doesn’t file a competing motion, that other, non-moving party is definitely not entitled to an award of summary judgment. Id. In order to be granted summary judgment, you have to be a “moving” party.

So, in the end, keep this opinion handy when you’re preparing for a summary judgment hearing, where the opposing party doesn’t file its own motion. There, it’s a “Win/Not Win” situation for you.

Start 2019 Right: Apply to be a Lawyer Mentor

With the new year, I’ve committed to serving the community more in 2019 than ever before.

To that end, I’ve signed up to mentor 7 high school students via the tnAchieves program, I’m coaching (maybe) a Mock Trial team at one of Nashville’s inner city high schools this spring, and, of course, I’m still going to visit Legal Aid regularly and continuing my service at The Village Chapel.

If you’re looking for an opportunity to get more engaged, I really recommend the Tennessee Bar Association’s Mentoring Program. It’s not too big of a time commitment and, trust me, you’ll make a lifelong friend in the process.

And, because we’re lawyers, the way we interact, foster relationships, and model civility in the bar with each other matters.

If you’ve got a few years under your belt (and, don’t worry, any experience matters and they’ll place you with an appropriate mentee), you’re needed.

Apply here.

Tennessee Post-Judgment Interest Rate at All-Time Modern High

Once upon a time, computing post judgment interest was really, really easy. But, 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.

Under that statute, the post judgment interest rate is subject to increase every six months. And, lately, it’s been steadily going up, every six months.

On January 1, 2019, it went up again, to 7.45%.

This is the highest that it’s been, since the statute changed.