J. Patrick Sutton Cases & Issues Blog

Lawyering In the Good 'Ol Boy State

Handling collections cases, whether on the debtor or creditor side, is hardball. It's hard to make friends with the opposition when they have your money.
This blog post is partly about how Austin is changing and partly about the nature of lawyering generally.

In a recent court pleading, I was accused by another lawyer of being unethical and breaking the rules. I was also accused of being the kind of lawyer that makes people hate the legal system. My offense? To collect money from someone that stiffed my client, refused to pay even when my client got a judgment, and concealed valuable assets.

Let's go back. I've got a client that nearly went bust last year as the building trades ground to a halt. His business survived, however, and he didn't stiff anyone he owed money to. Unfortunately, he got stiffed by someone else. I was hired to collect on the debt.

After getting a judgment and a judgment lien on the debtor's undeveloped tracts of land, I got wind of an imminent sale of that land. The debtor, not realizing I knew of the impending sale, called me to renew a take-it-or-leave-it lowball offer that my client had rejected a few weeks prior. Meanwhile, a title company was asking me for the payoff amount for the debt. It was a confusing situation since the debtor appeared to be trying to conceal his true resources even as a title company was indicating my client might get paid everything. My client, however, was not privy to the sale or sale contract and knew nothing about what was happening (there was a big 1st lien involved). We needed to be at that table.

Under Texas law, there is a special "ex parte" (that is, with no notice to the other side) procedure for collecting on judgments. Why no notice? Because the debtor already knows he owes the judgment debt; he can't halt collections procedures anyway. The ability to move on collections without notifying the debtor is a powerful tool for a creditor who already has a judgment in hand against a debtor who has resources but still won't pay or admit what she has. I don't always use this procedure (known as "turnover"), and I don't always do it without notice to the other side. But when I do proceed without notice, it's because I'm strategizing on the best way to collect money for someone who is owed the money. That is, I'm going what I see as my job.

To some lawyers, not giving the other side a heads-up (like a phone call in advance) about what you're doing is unethical. To me, it's just zealous lawyering.

What ultimately happened is that my client got a court order putting us at the table in the real estate transaction. The real estate sales contract was an important asset, and my client wanted to get paid from the sale proceeds if at all possible. Then, without further ado, the debtor cried uncle and paid my client.

Now, the turnover collections procedure is no secret. Any lawyer can pick up the statute book and read about it. Whenever there's an asset that's not easily reached with other collections tools (cash and contract rights are good examples, and the debtor in my case had both!), turnover is an option. A debtor's lawyer should expect it and be watching the docket for it, particularly if post-judgment discovery asking about money and non-land assets gets served.

Nevertheless, in my case, using turnover without notice set the other lawyer off and resulted in a furious (and irrelevant) pleading being filed with the court. I was personally accused of a litany of violations of ethics and procedure. In using the established rules successfully, I was considered blameworthy by a debtor who didn't want to pay.

Since beginning my Texas practice in Austin in 2007, I have run across a few lawyers who take great offense at not being given a phone call in advance about everything I'm doing. I suppose it's a remnant of older-style, small-town practice where a few lawyers handle everything and there's a lot of confidential give-and-take to get problems resolved (no offense to small-town practitioners intended). But it's not what I was taught to do, and I'm not in this business to be best friends with opposing counsel.

Austin is a big city, now, and the whole country is in tough economic times. I represent both creditors and debtors zealously and without personal feelings. In the creditor cases, I use every rule available to get my client's money. In the debtor cases, I make creditors prove that my clients owe money. In both cases, lawyers on the other side who expect me to pick up the phone and chat them up about what I'm doing are going to be disappointed.

If you hire me to help you, whether you're a creditor or a debtor, I'm not going to win any popularity contests with the methods I use to do that. I study the rules and I play by them. And so long as I get money in your pocket, or keep the creditor's hands out of yours, I feel I've done my job.

I've never lived in a small town. I'm not a small-town lawyer.
J. Patrick Sutton Cases & Issues Blog