Judgment Renewal is Easy; Calendaring the Deadline can be Hard

Nearly ten years ago, I preached about the virtues of patience and perseverance in collection of judgments. Specifically, I discussed Tenn. Code Ann. § 28-3-110, which says that judgments are good for ten years. For judgment creditors, a lot can change for your judgment debtors in ten years.

I constantly tell my clients that. For example, that Nashville property contractor who was dead broke in 2010 could be on top of the world in 2018 Nashville. Just be patient.

But, don’t be too patient. As you approach the ten year mark, remember that judgments can be renewed for another ten years, using a pretty easy, straight-forward process under Tenn. R. Civ. P. 69.04.

Under new(-ish) Rule 69.04, this can be done via Motion, but the Motion itself must be filed prior to the expiration of the judgment. So, Tennessee creditor rights attorneys, the burden is on you to make sure you’re making a list and checking it twice, looking for judgments that are nine years old, right?

Creditors: Make a Judgment List and check it. Twice, if necessary.

What happens if your law firm gets the judgment for a client but fails to renew the judgment?

Like many issues, it depends, but a brand new opinion from the Tennessee Court of Appeals discusses this issue. The case is Linda Rozen v. Wolff Ardis, P.C., W201900396COAR3CV, 2019 WL 6876769 (Tenn. App. Dec. 17, 2019).

In that case, the law firm obtained a judgment, generally discussed the 10 year requirement with the client, and, years later, no renewal request was made; the clients sued for malpractice.

There’s a lot to unpack in this case, but here’s my quick take-away:

When you get a judgment for a client, tell them that it will expire in ten years. As part of that message, remind them that people change firms, lawyers die, files get closed, files get dormant and sent to storage, things change, but, no matter what happens, if they want you to renew the judgment in ten years, they have to call you and specifically ask you to do it. Your representation does not necessarily include this renewal request, unless you and the client agree it does.

That was a decisive fact here, that the law firm had put the client on notice that specific action was needed to renew this judgment before ten years passed. As that ten year mark approached and passed, the client didn’t raise the issue, either by confirming that the firm did it or, alternatively, suing them for malpractice within one year of the failure to renew it.

So, in a perfect world, we calendar up all our judgments for renewal and we discuss the action with our clients in advance and mutually agree on an engagement for a renewal.

But, in reality, a lot of things can change in ten years. A good practice is to make sure that the client understands that it has a responsibility in ten years to notify you that it wants you to take this action.

Tennessee Court of Appeals shows analysis on “reasonable” attorney fees.

The Tennessee Court of Appeals issued an opinion yesterday in a collection case, which has some really useful analysis on the reasonableness of attorney’s fees. This is an issue near and dear to my heart.

A full copy of the opinion, Tennessee Farmers Cooperative v. Ted Rains,  M201801097COAR3CV, 2019 WL 3229686 (Tenn. App. July 18, 2019), can be found here.

Continue reading “Tennessee Court of Appeals shows analysis on “reasonable” attorney fees.”

Increase in Tennessee Homestead Exemption Fails. For Now.

Last month, the hot topic in the Tennessee creditor rights lawyer world was the rumored increase in the Tennessee homestead exemption.

Well, “rumor” is an understatement. This proposed change had real momentum and had a very strong chance of happening.

As you’d expect, this proposed change completely freaked out the creditor lawyers. I’m on the Tennessee Bar Association’s Creditor’s Practice Executive Committee, and here’s an excerpt of an email I received about it all:

This bill is bizarre. The exemption would go from the current $5,000.00-$25,000.00 to $150,000.00-$750,000.00 – a 3,000% increase!

This proposal should be officially opposed by the TBA. It would have a huge impact on banks’ and businesses’ ability to be repaid their just debts and judgments. Judgment debtors could hide any monetary assets they have in real estate and avoid having to repay what they promised to pay. This bill would legislatively tell debtors they do not have to repay their debts.

This sounds like something which Elizabeth Warren and Alexandria Ocasio-Cortez might suggest.

This is not a close call. This bill is off the charts bad.

So, yes, the creditor response was pretty clear, and a quick coalition formed involving the Tennessee Banker’s Association, the Tennessee Bar Association, and a handful of other similar groups.

In the end, the House Judiciary Committee deferred the homestead bill until next year. The bill will be moved to the committee’s first calendar of next year. When it comes up then, it will be in the form considered by the Committee in its last consideration, which was in the “flat” amount of $35,000. 

Ultimately, this seems like a fair amendment. Tennessee is pretty squarely in the bottom, with one of the lowest homestead exemptions in the nation.

When it comes up, I hope the sponsors propose an increase that reflects an adjustment for inflation, and not some drastic increase designed to make Tennessee a haven for asset protection. The fatal flaw in this proposed change during this session was that there was no justification or supporting data for an increase to $750,000 or a million dollars, especially when exemptions are designed to provide a “fresh start” to broke judgment debtors. It all seemed arbitrary.

Oh well, stay tuned, and I’ll report back in 2020.

Tennessee Post-Judgment Rate is at (New) All Time High

More than four years ago, I complained about the (then) new post-judgment interest rates in Tennessee. Long story short, the interest rate on judgments in Tennessee used to be a clean, easy 10%. Under the new version of Tenn. Code Ann. § 47-14-121, judgments accrue interest at a variable rate, that could change every 6 months.

One of my complaints was that it’s so difficult to figure out what the rate is at any time, but, luckily, the statute requires the administrative office of the courts to publish the applicable rate.

So, today’s post is to notify you of this: As of July 1, 2017, the rate is as high as it’s ever been, at a whopping 6.25%.

The Law is All Paperwork: An Improperly Authenticated Judgment may Result in Dismissal of Foreign Judgment Action

On my Facebook page, I describe myself as “The Garth Brooks of Paperwork.” Which is a way of poking fun at lots of things about me and my job.

But, law students, please know that success as a lawyer is basically 65% being really good at paperwork.

Thankfully, for the other 35% of us, you can generally amend pleadings to correct mistakes or errors. I’ve recently found a situation where you can’t amend a court filing, such that the entire case might be dismissed.

It’s when there’s an error in your initial filing of a Notice of a Foreign Judgment under the the Uniform Enforcement of Foreign Judgments Act (the “Act”), found in Tennessee at Tenn. Code Ann. § 26-6-101 et.seq.

If a judgment creditor fails to attach a proper exhibit, i.e. a properly authenticated copy of the out-of-state judgment to be enforced, there is a line of cases in Tennessee that say the entire lawsuit is defective because the failure to follow the statutory procedure for authenticating a foreign judgment is fatal as a matter of law.

What’s scary about this line of cases is that there appears to be no ability to file a Motion to Amend Pleadings under Rule 15. Those types of requests are generally granted and would usually allow the plaintiff to correct the error and move on.

Not in proceedings under the Act, Tennessee Courts have said. A recent trial court decision found that a Notice of Filing was not one of the expressly provided list of “pleadings” in Rule 7.01 and, therefore, not subject to amendment under Rule 15.01.

Tenn. R. Civ. P. 15.01 allows parties to amend their pleadings, and leave to amend pleadings is freely granted by the courts when justice demands. Tenn. Rule 7.01 defines “pleading” as a complaint, answer, counter-complaint, answer to a cross-claim, a third-party complaint and third-party answer and states that “no other pleading shall be allowed.’ The Notice of Filing required by Tenn. Code Ann. § 26-6-104 is not one of the pleadings listed in Rule 7.01.

Apparently, then, the judgment creditor’s only recourse when the foreign judgment notice is defective is to dismiss the domestication action, and then re-file a corrected, new proceeding. Yikes.

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.