Source: https://creditorsrights101.com/2014/07/
Timestamp: 2019-04-19 03:22:26+00:00

Document:
This is an issue I’ve written about before, in Collection on Unpaid Invoices: One Really Good Reason to Wait a Year.
But, I mention it again because the Tennessee Court of Appeals revisited the issue recently, in Scott Ostendorf, et. al. v. R. Stephen Fox, et. al. (Tenn. Ct. Apps., No. E2013-01978-COA-R3-CV, July 16, 2014).
In that case, the law firm committed possible malpractice regarding the perfection of a client’s lien security interest rights. The issue came to light in November 2008, and the client sued for malpractice in March 2012. Clearly, the lawsuit was filed more than one year after the facts alleged to be malpractice.
As I said in my prior post, I’m not condoning legal malpractice, nor suggesting that you should play hard-ball in collection of unpaid invoices for services that involved malpractice. But, as I said in my last post, if you sue a client for unpaid bills, it’s more than likely going to result in that client claiming malpractice, whether it’s merited or not.
If you think that such a claim will be raised from vindictiveness or tactic planning, then any lawyer should sit on the unpaid bills for services for at least a year. It’s an easy summary judgment / failure to state a claim upon which relief can be granted issue.
Here’s why: Tennessee follows the “American Rule” on awarding attorney’s fees which states that “a party in a civil action may recover attorney fees only if: (1) a contractual or statutory provision creates a right to recover attorney fees; or (2) some other recognized exception” applies. Cracker Barrel Old Country Store, Inc. v. Epperson, 284 S.W.3d 303, 308 (Tenn. 2009).
The contract provision allowing attorney fees to be recovered has to be very specific. In the Cracker Barrel case, the contract at issue provided that the prevailing party should recover “all costs and expenses of any suit or proceeding.” The Tennessee Supreme Court held that this language was not specific enough to award attorney fees (instead, it allowed recovery of court costs and litigation expenses).
This is an important issue, as the ability to recover your expenses and costs as part of your action will be a big consideration in any decision to file a lawsuit. Lawyers are expensive. Keep that in mind on the front end, when you’re preparing a contract or agreement, and get very specific text allowing for recovery of attorney fees.
One of my greatest victories was the favorable opinion I obtained for a client in GreenBank v. Sterling Ventures, et. al. , decided on December 7, 2012.
I blogged about it here, but to recap: That case was the first consideration of a foreclosure deficiency attack under Tenn. Code Ann. §35-5- 118(c). Under that statute, a borrower can argue that a foreclosed property sold for “materially less” than fair market value and, under §35-5- 118(c), a court can deny a deficiency judgment to the foreclosing creditor.
In an opinion issued this past Friday, the Court of Appeals revisited the statute in Capital Bank v. Oscar Brock, No. E2013-01140-COA-R3-CV – Filed June 30, 2014 (see full text here). The case followed the established precedent of Sterling Ventures and its progeny.
months or even years before or after the time the Property was sold at foreclosure.” This was a major victory in the original Sterling Ventures case, since borrowers want to make these issues a “fact” question, forcing a trial and delay of judgent.
Courts continue to look at percentages when determining what “materially less” means. Sterling Ventures and the later opinions all say the courts want to avoid setting a “bright-line percentage, above or below which the statutory presumption is rebutted.” That has basis in the legistlative history of the statute, where the lawmakers used “material” based on its usage in child custody cases. Nevertheless, the courts continue to apply a percentage test; in this case, spread was 15.8% and the sale was upheld.
This Court shot down a number of other arguments, including: those based on the amounts of several post-foreclosure appraisals; based on the Bank’s ultimate sale-listing price; and an argument that the Bank committed “fraud” by bidding a lower amount when it planned to market the property at a higher amount.
The ultimate take-away on this remains the same as in the past.
Get an appraisal at or near the time of the proposed sale.
Bid an amount that is reasonably tied to the amount of your appraisal (or other reliable/admissible valuation).
Summary Judgment is a proper way to proceed, provided the foreclosing creditor was cautious and acted with this statute in mind.

References: v. 
 v. 
 v. 
 §35
 §35
 v.