An interesting bill, House Bill 1156, Senate Bill 651, is making its way through the Tennessee legislature, which will radically shift the risks of litigation by awarding litigation costs and “reasonable and necessary attorney fees” to the prevailing party, even where no agreement to pay such fees exists between the parties. Today, the legislation passed in the House Judiciary Subcommittee–unanimously.
This would be very different than the current law. As it is now, a party cannot recover attorney fees in Tennessee litigation unless they have a written agreement granting the right to recover those fees or unless they sue under a statute that expressly provides those rights. Absent either of those, a creditor can’t recover attorney fees.
This bill, which would be the new Tenn. Code Ann. 20-12-119, awards “reasonable and necessary attorneys fees” (as well as other litigation expenses) in civil cases to the “prevailing party” (as long as the party did not hire its counsel on a contingency fee basis). The text says that the “judge shall” grant this recovery–it’s not discretionary.
The ability to recover attorneys fees is a big deal in litigation, as the potential of paying for the other side’s lawyers is often a detriment to prolonged fights. On creditor actions, especially smaller claims, creditors often base their decision on whether to sue on whether they can recover their expenses. Without that, the cost of suing on debts and small claims doesn’t make sense.
This proposed legislation is certainly a drastic change to Tennessee practice and, as much as I think it would benefit creditors in general, I question the fairness of the law. Frankly, litigation isn’t always “Right Versus Wrong,” and matters sometimes get tried not because of stubbornness, but because there is no clear answer to an issue. To award fees in such disputes without any such agreement seems unduly punitive.
Today, Memphis’ Commercial Appeal–my favorite paper in the state–published an editorial titled “Nice Break for Banks” about proposed Tennessee legislation to reduce the number of newspaper notices that banks must publish prior to conducting foreclosure sales.
Instead of the current 3 consecutive publications required by Tennessee Code Annotated Section 35-5-101, Tennessee House Bill 1920 and Senate Bill 1299 would require only one notice and would cut out some of the legalese from the property description.
Opponents, including the editorial, complain that these proposals drastically expedite an already short and unsupervised process. The proposed changes “relieve lenders of practically all sense of responsibility in the foreclosure process adds insult to injury on Tennesseans,” the Commercial Appeal says.
From the bank’s perspective, running three publication notices in a newspaper drastically increases the cost of a foreclosure, and there’s good reason to believe that newspaper publication notices do not provide any greater assurance of actual notice to the defaulted borrowers.
It’s disingenuous to suggest that borrowers will be victims of stealth foreclosures in Tennessee if publications are reduced, and the editorial entirely leaves out a discussion of Tenn. Code Ann. Sec. 35-5-117, which requires a Notice of Right to Foreclose be sent to defaulted borrowers at least 60 days in advance of foreclosure sale publication.
If you want to argue that Tennessee’s non-judicial foreclosure system favors lenders, that’s a different argument (but, let’s be sure to discuss the problems with the judicial-only process in Florida as part of that debate).
But, if your argument is that more newspaper notices are the last line of defense for the “devastation–financial and otherwise–that financially strapped families” face, well…I’d save that newspaper space for advertisements.
From time to time, the judgment enforcement process hits a brick wall because your debtor is “judgment proof,” which means that they don’t own anything: no car, no property, and no cash.
This can be a disconnect from reality, especially where the debtor lives in a big house with a fancy car parked in the driveway. How can this guy be broke?
That’s when I investigate fraudulent transfers, which are transfers out of the debtor’s name to a third party—a wife, parent, or child—to keep the assets out of the creditor’s reach. This is more common than you’d think.
Tennessee has adopted the Uniform Fraudulent Transfer Act, at Tenn. Code Ann. § 66-3-301 et seq. That Act provides for a number of “badges of fraud,” such as transfers to an “insider”, transfers that render the person insolvent, transfers where equal value is not given for an asset, or transfers with “actual intent” to hinder or defraud creditors.
The transfer was made prior to a substantial debt was incurred.
Under Tennessee law, a creditor can attack fraudulent transfers from up to four (4) years preceding your lawsuit.
Long story short, when enforcing a judgment in Tennessee, don’t just examine what your debtor owns, but look also to what he used to own. Then, look back at least 4 years, because, in Tennessee, fraudulent transfers can be attacked for a long time.
Transfers of the big assets (like real property) are all of public record, so your cause of action can easily be discovered, if you know to look for it.