In The News

David Anthony to Lead Creditor Rights 101 Webcast for Tennessee Bar Association

Bone McAllester Norton’s David Anthony will teach a CLE webcast for the Tennessee Bar Association. The course, “Creditor Rights 101: 10 Collection Strategies Every Lawyer Should Know,” will take place from noon to 1 p.m. on Wednesday, April 17, 2013, and will cover essential collection concepts under Tennessee creditor rights laws. The discussion will include:

  • Pre-lawsuit considerations

  • Statute of limitations issues

  • Jurisdiction and venue selection

  • Judgment enforcement options

  • Basic bankruptcy issues

  • Common roadblocks to collecting money


This webcast will count for one hour of CLE. For more and to register, click here.

Bone McAllester Norton PLLC is a full-service law firm with 33 attorneys and offices in Nashville and Sumner County, Tennessee. Our attorneys focus on 16 distinct practice areas, providing the wide range of legal services ordinarily required by established and growing businesses and entrepreneurs. Among our practices, we represent clients in business and capital formation, mergers and acquisitions, securities matters, commercial lending and creditors’ rights, commercial real estate and development, governmental regulatory matters, commercial litigation and dispute resolution, intellectual property strategy and enforcement, entertainment and environmental matters. Our client base reflects the firm’s deep understanding and coverage of today’s leading industry and business segments. For more information, visit www.bonelaw.com.

Bonelaw Attorneys Involved in Court Decision of “Materially Less” in Foreclosure Sales

Tennessee Court of Appeals Issues First Opinion Examining Tennessee Deficiency Judgment Statute
Background:  In the wake of the real estate market collapse, the Tennessee legislature passed, effective September 1, 2010, a statute dealing with deficiency judgment on real property after a trustee’s or foreclosure sale. The statute created a rebuttable presumption that the amount bid at a foreclosure sale equal the fair market value of the property. Debtors could overcome this presumption by showing that the bid was “materially less” than the fair market value.

Case:  Bone McAllester Norton PLLC attorneys David Anthony, Sean Kirk and Tucker Herndon represented the Lender who filed suit to obtain a judgment for the deficiency against the Borrower and Guarantors ( the “Defendants”) after completion of foreclosure against the real property collateral. The Defendants contested the foreclosure sale price as being materially less than fair market value. On a motion for summary judgment filed by the Lender,  the Trial Court and Tennessee Court of Appeals examined the deficiency statute and decided what “materially less” means.  The phrase “materially less” had never been used in any other Tennessee statute or court opinion.

The Lender purchased its own collateral at foreclosure for a mid-range bid based upon a current appraisal. Based upon an Affidavit, the debtor asserted that the fair market value of the property was greater. On Motion for Summary Judgment, the Trial Court held in favor of the Lender that a sales price of 89% - 91% of the recent appraisal was not “materially less.”

On appeal, the Tennessee Court of Appeals agreed with the Bone McAllester Norton PLLC attorneys, affirming the Trial Court decision on summary judgment, finding that the foreclosure bid price of 89% of the highest appraisal was not “materially less” and finding that the debtor had failed to raise sufficient facts to present a defense to summary judgment and the deficiency lawsuit.  The Court did not set a bright line percentage above or below which the statutory presumption is rebutted.

Lenders are well advised to continue the practice of obtaining current appraisals prior to foreclosure and base the foreclosure bid price on the current appraisals, taking into account costs of foreclosure and costs of owning the property.

David Anthony Explains “Materially Less” in Foreclosure Auctions to Nashville Post

Bone McAllester Norton attorney David Anthony shed some light on what constitutes “materially less” in foreclosure auctions in a December 14 Nashville Post article. This clarification gives banks the backing they might need in court.

Read more about this explanation here.

David Anthony Explains “Materially Less” in Foreclosure Auctions to Nashville Post

Bone McAllester Norton attorney David Anthony shed some light on what constitutes “materially less” in foreclosure auctions in a December 14 Nashville Post article. This clarification gives banks the backing they might need in court.

Read more about this explanation here.

David Anthony Presents at Continuing Legal Education Seminar

On June 7, 2012

David Anthony presents “Liens and Security Interests in Tennessee: What Attorneys Must Know.”

This Continuing Legal Education seminar reviews the various types of liens in Tennessee, including consensual liens, judicial liens, statutory liens, and common law liens. Additionally, Mr. Anthony’s presentation includes a discussion of advanced topics, such as dealing with state and federal tax liens and special issues arising under the Bankruptcy Code.

This webinar is presented by M. Lee Smith Publishers and is presented live from 10am to 11am Central. The webinar is also available in CD-Rom format after the seminar date.

www.mleesmith.com/products/audio-conference-on-cd/tn-liens-cd
David M. Anthony concentrates his practice in the areas of bankruptcy, commercial litigation, creditor’s rights, construction, and lien litigation. Mr. Anthony represents clients throughout middle Tennessee in state, federal, and bankruptcy courts. He also has significant experience representing financial institutions and other creditors in all aspects of the litigation process.

Bone McAllester Norton's Involvement in Bankruptcy Case Noted in Bloomberg News

Bone McAllester Norton's involvement in a major Middle Tennessee bankruptcy matter was noted by Bloomberg News, in its January 20, 2010 Bankruptcy Update:

Tennessee Development Files, Sees Immediate Lift Stay

Wood Ridge Development Inc. and an affiliate filed Chapter 11 petitions on Jan. 15 in Nashville, Tennessee, to stop foreclosure scheduled later that morning.

The secured lender, GreenBank, filed a motion the same day asking the bankruptcy judge to modify the so-called automatic stay so the foreclosures could be rescheduled. The bank said it's owed $7.3 million on almost 70 acres of undeveloped land in Nolensville, Tennessee.

The bank said no lots have been sold in two years, according to a court filing by David M. Anthony, an attorney for the bank from Bone McAllester Norton PLLC in Nashville.

The case is Wood Ridge Development Inc., 10-00325, U.S. Bankruptcy Court, Middle District of Tennessee (Nashville).

David is a member of Bone McAllester Norton's Creditors' Rights practice group. Sam McAllester and Tucker Herndon, fellow members of the Creditors' Rights group, have been extensively involved in the matter as well. The full article appears at Bloomberg.com.

Bone McAllester Norton's Involvement in Bankruptcy Case Noted in Bloomberg News

Bone McAllester Norton's involvement in a major Middle Tennessee bankruptcy matter was noted by Bloomberg News, in its January 20, 2010 Bankruptcy Update:

Tennessee Development Files, Sees Immediate Lift Stay
Wood Ridge Development Inc. and an affiliate filed Chapter 11 petitions on Jan. 15 in Nashville, Tennessee, to stop foreclosure scheduled later that morning.

The secured lender, GreenBank, filed a motion the same day asking the bankruptcy judge to modify the so-called automatic stay so the foreclosures could be rescheduled. The bank said it's owed $7.3 million on almost 70 acres of undeveloped land in Nolensville, Tennessee.

The bank said no lots have been sold in two years, according to a court filing by David M. Anthony, an attorney for the bank from Bone McAllester Norton PLLC in Nashville.

The case is Wood Ridge Development Inc., 10-00325, U.S. Bankruptcy Court, Middle District of Tennessee (Nashville).

David is a member of Bone McAllester Norton's Creditors' Rights practice group. Sam McAllester and Tucker Herndon, fellow members of the Creditors' Rights group, have been extensively involved in the matter as well. The full article appears at Bloomberg.com.

David Anthony Discusses Changes in Foreclosure Laws

 A 2010 change in foreclosure laws is helping bring some pricing sanity back into the market.


Published May 31, 2011 by J.R. Lind


What’s the market value of something when the market isn’t functioning? If there are no buyers — no matter the price — figuring that value can be as impossible as dividing by zero.


When the housing market was hopping along, there was no shortage of buyers when a bank needed to sale a property at foreclosure and any difference between the sale at public outcry and the outstanding amount of the loan could be sought through the court system. If a home with a $500,000 mortgage sold for $400,000, a bank could easily come for the remaining $100,000.


That worked just fine when there are plenty of buyers. But what if, as has happened during this housing crisis, the buyers disappear and the banks are stuck buying back the foreclosed tracts?


The logical answer is that if there is only one bidder — in this case, the banks themselves — the rational choice would be to bid as low as possible and, again, seek the deficiency in the courts.


"When the economy hit the skids, foreclosure sales for a while were getting prices at 20 percent of the loan value — crazy low — and I don’t think that was a function of the real value being 20 percent. We just stopped having a functioning market," said Bob Mendes, a member at MGLaw. "If you are a bank, you have to make a decision: Would you rather bid in at 20 percent and be able to sue for $400,000 deficiency or bid in at 80 percent and sue for $100,000 deficiency?"


In an effort — spearheaded by a reeling development community — to keep bankers from systemically underbidding, the state legislature last year enacted a change in the foreclosure law that has given legal recourse to the borrower. Under a handful of appellate cases, borrowers already had a right to sue if the market value was too low, but as is often the case from court decisions, there were lots of gray areas.


And while the legislature sought to protect the borrowers through legislation, the law may have actually had the opposite effect, said Bone McAllester Norton attorney David Anthony.


"The clarity of the new statute provides an obstacle for attacks on the foreclosure bid price," he said. "In the past, the standard was unclear. Now, it’s a clear test and easier to overcome… The burden is clearly on the debtor to prove by a preponderance of the evidence that the property sold for an amount materially less than the fair market value… That’s not an easy standard to meet."


So in a way, the law managed to both benefit and hinder each side in the creditor/defaulted borrower battle.


"Before the law changed, our advice to lenders was, ‘Start the bidding on the low end of the range of market value,’" Mendes said. "Post the law changing, there’s a little more art, because there’s not as many bidders. But under the statute, if you have successfully predicted something in the range of market, you have defended yourself… If we’ve seen any impact, it’s that banks are back to bidding into a price where the market is."


In a recent sale, Mendes said, the bank put up a property for outcry that held a $2.1 million debt. Eventually, the lender bought back the property at $1.5 million, a hefty tag that still left a $600,000 deficiency for the borrower to overcome. A year ago, Mendes said, the bid could have come in "hundreds of thousands of dollars lower."


Anthony said most bankers already were careful to make fair bids, even in the tough economy, in large part because a too-large deficiency might trigger a bankruptcy for the borrower, in which case they would likely not see the money anyway.


What he sees as the major change is the tightening of the statutory window, the time lenders have to seek those deficiencies, from six years to two.


"Bankers are getting tired of these legal fees, so they’d do these foreclosures … and then sit on them. Some banks would even sell the deficiency on the note," Anthony said. "Now you only have two years to sweat it out. Six years is a long time to kick the tires. I think banks are desensitized to chasing down deficiencies, but now they don’t have forever."


Anthony said he wasn’t sure the law was a "gut reaction" to the rash of foreclosures that beset most parts of the country when the housing bubble burst. That affliction has inspired a slew of proposed changes to Tennessee’s foreclosure procedures, the most widely debated of which has been a plan to no longer require that foreclosure notices be printed in newspapers of record.


SouthComm, the parent company of Post, is one of a number of media companies that have hired lobbyists to oppose the change. But, Mendes said, in a normal market, these things become less of a hot-button issue.


"This statute only matters in a historically ridiculous time. As soon as we get back to a functioning economy, bidders will set the price, but in the absence of bidders, banks are," he said. "It’s just brought everybody back to what the norm has always been: Foreclosures should be priced at market value."


Click here for the entire story in the Nashville Post.

David Anthony discusses changes in foreclosure laws

 A 2010 change in foreclosure laws is helping bring some pricing sanity back into the market


Published May 31, 2011 by J.R. Lind


What’s the market value of something when the market isn’t functioning? If there are no buyers — no matter the price — figuring that value can be as impossible as dividing by zero.


When the housing market was hopping along, there was no shortage of buyers when a bank needed to sale a property at foreclosure and any difference between the sale at public outcry and the outstanding amount of the loan could be sought through the court system. If a home with a $500,000 mortgage sold for $400,000, a bank could easily come for the remaining $100,000.


That worked just fine when there are plenty of buyers. But what if, as has happened during this housing crisis, the buyers disappear and the banks are stuck buying back the foreclosed tracts?


The logical answer is that if there is only one bidder — in this case, the banks themselves — the rational choice would be to bid as low as possible and, again, seek the deficiency in the courts.


"When the economy hit the skids, foreclosure sales for a while were getting prices at 20 percent of the loan value — crazy low — and I don’t think that was a function of the real value being 20 percent. We just stopped having a functioning market," said Bob Mendes, a member at MGLaw. "If you are a bank, you have to make a decision: Would you rather bid in at 20 percent and be able to sue for $400,000 deficiency or bid in at 80 percent and sue for $100,000 deficiency?"


In an effort — spearheaded by a reeling development community — to keep bankers from systemically underbidding, the state legislature last year enacted a change in the foreclosure law that has given legal recourse to the borrower. Under a handful of appellate cases, borrowers already had a right to sue if the market value was too low, but as is often the case from court decisions, there were lots of gray areas.


And while the legislature sought to protect the borrowers through legislation, the law may have actually had the opposite effect, said Bone McAllester Norton attorney David Anthony.


"The clarity of the new statute provides an obstacle for attacks on the foreclosure bid price," he said. "In the past, the standard was unclear. Now, it’s a clear test and easier to overcome… The burden is clearly on the debtor to prove by a preponderance of the evidence that the property sold for an amount materially less than the fair market value… That’s not an easy standard to meet."


So in a way, the law managed to both benefit and hinder each side in the creditor/defaulted borrower battle.


"Before the law changed, our advice to lenders was, ‘Start the bidding on the low end of the range of market value,’" Mendes said. "Post the law changing, there’s a little more art, because there’s not as many bidders. But under the statute, if you have successfully predicted something in the range of market, you have defended yourself… If we’ve seen any impact, it’s that banks are back to bidding into a price where the market is."


In a recent sale, Mendes said, the bank put up a property for outcry that held a $2.1 million debt. Eventually, the lender bought back the property at $1.5 million, a hefty tag that still left a $600,000 deficiency for the borrower to overcome. A year ago, Mendes said, the bid could have come in "hundreds of thousands of dollars lower."


Anthony said most bankers already were careful to make fair bids, even in the tough economy, in large part because a too-large deficiency might trigger a bankruptcy for the borrower, in which case they would likely not see the money anyway.


What he sees as the major change is the tightening of the statutory window, the time lenders have to seek those deficiencies, from six years to two.


"Bankers are getting tired of these legal fees, so they’d do these foreclosures … and then sit on them. Some banks would even sell the deficiency on the note," Anthony said. "Now you only have two years to sweat it out. Six years is a long time to kick the tires. I think banks are desensitized to chasing down deficiencies, but now they don’t have forever."


Anthony said he wasn’t sure the law was a "gut reaction" to the rash of foreclosures that beset most parts of the country when the housing bubble burst. That affliction has inspired a slew of proposed changes to Tennessee’s foreclosure procedures, the most widely debated of which has been a plan to no longer require that foreclosure notices be printed in newspapers of record.


SouthComm, the parent company of Post, is one of a number of media companies that have hired lobbyists to oppose the change. But, Mendes said, in a normal market, these things become less of a hot-button issue.


"This statute only matters in a historically ridiculous time. As soon as we get back to a functioning economy, bidders will set the price, but in the absence of bidders, banks are," he said. "It’s just brought everybody back to what the norm has always been: Foreclosures should be priced at market value."


Click here for the entire story in the Nashville Post.


 

David Anthony’s Blog Featured in the Nashville Business Journal

David Anthony and his legal blog, Creditor’s Rights 101, were featured in the December 24, 2010 edition of the Nashville Business Journal.


 The article, titled “Standing Out on the Web,” discussed the ways companies are using the internet and, in particular, blogs to promote their services and skills.


Mr. Anthony’s blog provides readers with a discussion and explanation of news and trends related to the collection of debt.


Click to read the Nashville Business Journal’s article, “Standing Out on the Web.”  (subscription required)


 

David Anthony’s Blog Featured in the Nashville Business Journal

David Anthony and his legal blog, Creditor’s Rights 101, were featured in the December 24, 2010 edition of the Nashville Business Journal.

 The article, titled “Standing Out on the Web,” discussed the ways companies are using the internet and, in particular, blogs to promote their services and skills.

Mr. Anthony’s blog provides readers with a discussion and explanation of news and trends related to the collection of debt.

Click to read the Nashville Business Journal’s article, “Standing Out on the Web.”  (subscription required)

 

Time is On Your Side: 4 Tips for Collections in a Recovering Economy

By David M. Anthony


Despite the constant reports of rising foreclosure rates and bankruptcy filings, the news world was abuzz last week about the report from the National Bureau of Economic Research (NBER) that the Great Recession had ended…in June 2009. This surely came as a surprise to loan officers and small businesses everywhere who are seeing their fair share of loan defaults and increasingly uncollectable accounts receivable.


Anticipating this response, the NBER explained that, while the economy had not yet returned to operating at normal capacity, the worst was behind us. While this good news doesn’t put money into hands today, here are some things any creditor should bear in mind while we wait for the economy to fully recover.


There’s time to be patient.  In Tennessee, the statute of limitations for collection on an unpaid debt is six (6) years, pursuant to Tenn. Code Ann. § 28-3-109. Then, once you sue and obtain a judgment (within six years from the date of the default), your judgment is valid for ten years, pursuant to Tenn. Code Ann. § 28-3-110.  Plus, if your judgment remains unpaid at the end of the ten years, Tennessee judgments can be renewed pursuant to § 28-3-110 for another ten year period.


Don’t wait to act.  In some instances, it may make sense to take no action on unpaid debt. Maybe the customer is a company that has gone out of business and has no remaining assets, or maybe they’ve filed a liquidation bankruptcy.  This is where you make the “don’t throw good money after bad” decision and possibly decide to write this debt off.


But, remember, the first creditor to obtain a judgment is the first in line to seize assets. Granted, you could be the first in line and discover there are no assets, but you should nevertheless record your judgment as lien in the real property records. For less than $25 in filing fees, a creditor can record a certified copy of its judgment in any and all Tennessee counties where the debtor owns real property, and that judgment becomes a lien on any real property owned by the debtor.


Even if they don’t have any equity in their property today, the situation could well be different in ten years (judgment liens remain valid as long as the underlying judgment is valid). What’s more, your lien’s reach will capture any real property they obtain during the life of the lien. In the end, sooner or later, your debtor will have to deal with you, whether it be as part of a purchase of new property, a sale, or a refinance.


Bend, don’t break. Sometimes, it’s important to recognize when a debtor truly lacks any assets to pay toward your debt. When this is the case, aggressive collections—whether it be seizing a work truck or all funds out of a bank account—may put that debtor out of business and, possibly, into a bankruptcy filing. A judgment creditor can take depositions and request financials from their debtor, and this information may assist you in determining whether they aren’t paying anybody…or just aren’t paying you.


Bankruptcy doesn’t mean the process is over.  If your debtor does file a bankruptcy case, there’s still a chance of monetary recovery. In addition to the benefits to the debtor, the secondary point of the bankruptcy process is to maximize return for creditors prior to granting the debtor a discharge of his or her debts. But, in most instances, a creditor in bankruptcy only receives pennies on the dollar in the process.


Keep in mind, however, the success rate in Chapter 13 bankruptcy cases (where debtors repay a percentage of their debts over 3 to 5 years) can be as low as 20%, meaning that most of those cases end with a dismissal. A dismissal is good for a creditor, because there is no discharge of the debt. Instead, the full amount remains due and owing. Debts are eliminated only when debtors receive a “discharge.” That’s an important distinction to know.


Finally, remember that a bankruptcy discharge only discharges “debts”—not “lien” rights. So, if you’ve already obtained a judgment and recorded it as a lien, then your lien on the debtor’s property survives the bankruptcy discharge. As a result, even though you can’t collect your debt, you can enforce your lien in the event of an attempted sale or refinance.


In the end, collection is a process that rewards the patient, especially in a recovering economy. But, a successful creditor must be prepared, and being prepared means having a valid judgment in place and exhausting all enforcement remedies before giving up. We all hope that the reports are right, and, if they are, the steps you take today will help make sure you’re paid in the future.


David M. Anthony practices with Bone McAllester Norton PLLC in the firm’s Creditors’ Rights practice group, and he regularly writes about issues impacting bankruptcy, judgment collection, and lien litigation at his blog, Creditors Rights 101, www.creditorsrights101.com.


 

David Anthony Settlements Involving Former Titans Player Albert Haynesworth Covered in Tennessean

Bone McAllester Norton attorney David Anthony recently represented Nashville civil engineering firm Dale & Associates in two small-claims lawsuits against Washington Redskins defensive tackle and former Titans player Albert Haynesworth in disputes involving $50,000 in unpaid surveying and engineering expenses for a proposed townhome development and mixed-use residential and retail project that were never built.


Anthony’s settlement of the two cases in Davidson County Circuit court was covered in the Tennessean on July 27, 2010 in an article titled “Nashville Real Estate Briefs: Real estate disputes leads to settlement.”


 

David Anthony Settlements Involving Former Titans Player Albert Haynesworth Covered in Tennessean

Bone McAllester Norton attorney David Anthony recently represented Nashville civil engineering firm Dale & Associates in two small-claims lawsuits against Washington Redskins defensive tackle and former Titans player Albert Haynesworth in disputes involving $50,000 in unpaid surveying and engineering expenses for a proposed townhome development and mixed-use residential and retail project that were never built.

Anthony’s settlement of the two cases in Davidson County Circuit court was covered in the Tennessean on July 27, 2010 in an article titled “Nashville Real Estate Briefs: Real estate disputes leads to settlement.”

 

September 2010 Newsletter Features 11 Awards, Social Media Tips, Rappelling Off a Building, Economic Tips, ABC's First Liquor License & New Health Care Laws

September has been an especially busy month at Bone McAllester Norton.  To read the rest of our newsletter, click here.