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.

Employers Who Provide False Garnishment Answers May End Up Owing the Money Themselves

I got a judgment a few months ago, and, having found out where the judgment debtor works, I issued a wage garnishment against the debtor’s wages.

And, oh man, did I ever have that guy. Not only did he work there, but he was listed (and pictured) on their website as an executive. It was only a matter of days until I got my money, right?

Well, not exactly. The employer filed a response that said “Terminated.” That was a surprise. I checked the website. The guy was gone.   Did my garnishment get him fired?  Strange.

So, out of curiosity, I called the employer and got the company directory. The debtor was still listed. So, I waited a few weeks, and they were still listed. I tried the extension and, within seconds, I had the debtor on the phone.

Long story short, I think this employer is lying. What do you do?

Tenn. Code Ann. § 26-2-204 requires garnishment responses to be under oath. The law even anticipates that an employer might lie: “The answer of the garnishee is not conclusive.” Tenn. Code Ann. § 26-2-205. To that end, Tenn. Code Ann. § 26-2-206 allows a creditor to get a judgment against the employer if they actually have assets of the debtor in their possession.

So, in the end, a creditor has rights against a dishonest employer, but there are hoops to jump through. Though the statutes don’t lay this out, the procedure would be to subpoena the payroll records or otherwise get testimony from the employer to establish the veracity of the response. Then, the creditor must take the employer back to Court under § 26-2-206 to get a judgment.

It’s a hassle. But, if you lie, employers, I’m happy to take a judgment against you.

Tour of Tennessee Courts: Tips for Rutherford County General Sessions

I enjoy hitting the road and going to courts all over middle Tennessee. But, at the same time, it can be disconcerting to go to court in a new county, which generally has its own Local Rules and customs of practice. No matter how long you’ve been practicing, you never want to embarrass yourself in front of a foreign court.

So, I’m starting a “Tour of Tennessee” blog series, which discusses the different Courts that I go to, along with some tips and tricks for appearances.

First stop, Rutherford County General Sessions Court. Here is a link to the General Sessions Court’s website, which has updated, good information about the Court, including phone number, address, and Clerk information.

Note that the Rutherford County Courts, including General Sessions, post a variety of their  dockets online.  Be sure to print out a copy of the docket before you go to court.

Their Local Rules are also posted online, and read those before you go.

Here are some helpful tips to know from the Local Rules:

  • The Court presumes cases will be tried on the the date they are set, but, on the first setting in civil actions, the  “court may liberally grant a continuance on the first setting of a case.”
  • The Court does not allow “indefinite” continuances. Under Local Rule 5.01, the Court only allows continuances of less than 60 days.
  • The Court will only allow 3 continuances, absent good cause.
  • The Court caps attorney fees at 25%, unless good cause is shown.

Here are a few other things to know:

  • The Judge, Larry Brandon, is sharp, both in his legal acumen, as well as his wit and the way he runs the Courtroom. Stay on his good side by being early, paying attention, and reading the Local Rules before you go.
  • Seriously, that’s important: stay on his good side across the board.
  • Many Clerks are liberal and let you use any old Civil Warrant  forms, but, if you’re in doubt about your form, be sure to use the official Civil Warrant forms from the Rutherford County General Sessions Clerk.  Using the standard form is an important part of staying on the Judge’s and the Clerk’s good side.
  • On street parking is plentiful all around the Courthouse, and there are a number free lots available.
  • General Sessions Court takes place on the third floor of the Courthouse. The General Sessions Clerk is on the first floor.
  • The security line can get long, particularly if you’re running late. Be prepared to remove watches, belts, and other metal items. Attorneys can purchase “pre-screened” pass cards for $5, which allow you to by-pass security. If you go there a lot, keep that in mind.
  • The elevator  gets backed up, and, if you’re running late, head to the stairs in the back of the building.
  • Judge Brandon starts promptly, at 9AM.
  • It’s about a 45 minute drive from downtown Nashville, so give yourself an hour.
  • Cases are generally called in batches, organized by the Plaintiff’s attorney’s name, meaning all of an attorney’s cases are generally bundled together and called at the same time (and then that attorney is allowed time to go to the hall and review the matters or write them up).

Rutherford County General Sessions Court is an active court, often with a large number of cases (40-50) set on one docket. Be early, be prepared, and read the Local Rules, and your court appearance will go fine.

New Opinion Analyzes Common Defenses to Domestication of Foreign Judgments in Tennessee

A good rule of thumb in Tennessee is that a valid foreign judgment will be enforceable here, provided the plaintiffs comply with the procedural requirements of Tennessee Code Annotated § 26-6-101, et seq.

A new Tennessee Court of Appeals opinion, in Bancorpsouth Bank v. David J. Johnson, et. al. (July 16, 2013), examined both the general law, as well as the potential defenses to domestication. This is a good case to know, since it reviews all aspects of the foreign judgment enrollment process.

First, it presents the three “standard” defenses to domestication:

a forum state may decline to accord full faith and credit to the judgment or public act of another state if it is (1) void due to a lack of personal or subject matter jurisdiction, (2) based upon fraud, or (3) “where enforcement of the judgment would violate the public policy of the forum state.” …  Tennessee courts have recognized and adopted all three of these exceptions. … (citations omitted)

These defenses aren’t easy to establish, and the Court notes  “a party who seeks to show that a foreign judgment should not be enforced in Tennessee must meet a ‘stern and heavy‘ burden.”

Most attacks on a foreign judgment are under Defense No. 1 (that the judgment is void); this new case is interesting in that is that the Court provides a good analysis of Defense Nos. 2 and 3 (which no other case that I’ve seen has done).

Defense No. 2, Fraud:  “[T]o deny full faith and credit on the basis of fraud, there must be allegations of extrinsic fraud, that is, fraud that is collateral to questions which were either determined or which could have been determined in the underlying action. Extrinsic fraud is contrasted with intrinsic fraud, which pertains to an issue involved in the underlying action or where the acts allegedly constituting fraud were or could have been litigated…”

“‘[E]xtrinsic fraud ‘consists of conduct that is extrinsic or collateral to the issues examined and determined in the action,’. . . while intrinsic fraud is fraud within the subject matter of the litigation, such as forged  documents produced at trial or perjury by a witness.”

An example of extrinsic fraud is a party lying to the other party about the court date or committing some fraud regarding the litigation (something beyond the allegations of the lawsuit). Intrinsic fraud would be some fraud related to or contained in the allegations of the lawsuit, such as a fraudulent signature on the note at issue.

Defense No. 3, Public Policy:  “Under the public-policy exception to full faith and credit, “Tennessee courts are not obligated to give full faith and credit to any judgment of a state which we hold to be violative of Tennessee’s public policy or the Federal Constitution.”

This is rare, however: “The principle of giving full faith and credit to the judgments of sister states will “almost invariably” outweigh the interest of an individual state; the public-policy exception to full faith and credit is applied only on ‘extremely rare occasions.'”

While the Court doesn’t provide examples, the Defendants’ argument is illustrative. Here, they argued that the foreclosure that resulted in the deficiency balance at issue in the lawsuit was improper, and it was an issue that Tennessee has a defense for, under Tenn. Code Ann. § 35-5-118.

The Court saw this as an improper attempt to re-litigate potential defenses under the underlying judgment, not some public policy that rendered the out-of-state judgment unenforceable.

Most cases cite the three major defenses, and this new opinion is significant because it provides helpful analysis of what constitutes those defenses.

Last Chance to Learn: Creditors’ Rights in Tennessee: 10 Collection Strategies

A quick reminder: Tomorrow, June 6, 2013, I’ll be teaching the CLE  presented by M. Lee Smith Legal Publishers called Creditors’Rights in Tennessee: 10 Collection Strategies.

This is a one hour audio seminar, that will cover the usual Tennessee collections lawyer song and dance. Things like:

  • Things to consider prior to declaring a loan in default and filing a collections lawsuit
  • Issues in deciding between Chancery Court and General Sessions Court
  • Importance of knowing your Statute of Limitations
  • Making sure you Sue the Right Party
  • Judgment Liens and why they work
  • Fraudulent Transfers
  • Overview of bankruptcy issues, including preferences and Trustee avoidance actions
  • Common roadblocks to collecting money, including domestication of foreign judgments

It’s one hour of CLE credit, and, hopefully, what I teach you during seminar will put some money in your clients’ pockets.

New Tennessee Legislation Imposes Contempt Sanctions on Judgment Debtors Who Don’t Notify Creditors of New Employment

As a creditor rights attorney, I’m always looking for new developments in the law that gives me any advantage.

Recently, I saw that the Tennessee Legislature is considering a new law that gives creditors an unfair advantage.

I’m talking about Public Chapter 187, on wage garnishments, which would create the new Tenn. Code Ann. § 26-2-225. The statute provides, in part, that:

… A judgment debtor whose salaries, wages or other compensation are subject to a garnishment shall notify the judgment creditor who filed the writ of garnishment within ten (10) days, as computed in § 1-3-102, of obtaining any new employment. Notice to the judgment creditor shall be by certified mail and shall include the name, address and telephone number of the new employer. A judgment debtor who fails to provide notice of new employment in compliance with this section is in contempt of court and, upon the court making a determination of contempt, may be punished the same as contempt of court in a judicial proceeding. …

Under this proposed law, any debtor whose wages are being garnished must notify the creditor within 10 days, via certified mail, of any new employment.

As a creditor’s lawyer, sure, I understand why this law would be helpful: when a debtor switches jobs it can take months for me to figure out where they work. But, I’m surprised that  the Legislature would waste this energy to get involved in this collections cat-and-mouse game.

Frankly, even noting my creditor-friendly bias, I think this law goes a little far. An affirmative requirement that  the debtor send written notice, via certified mail, seems so onerous that I predict that a General Sessions Court would hesitate to impose h a contempt charge.

This is just a strange law, all around.