Judicial Foreclosure of VSF Liens on Low-Value Vehicles

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JUDICIAL FORECLOSURE OF VSF LIENS ON LOW-VALUE VEHICLES

THE METHOD OF LAST RESORT

By Brian Edward Walters, Attorney at Law

 

            Sometimes it feels as though Texas Department of Motor Vehicles offices have different standards for when you can foreclose on a vehicle storage facility lien depending on who is in the office and what time it is. We have heard stories about requiring different levels of documentation, including things like the certified mail tag, certified mail tag with stamp from the post office, the return receipt, the return receipt signed by the former owner, and even requirements that the DMV send out a notice to the owner before a title will be issued.

These differing paperwork requirements can quickly create a situation where the VSF cannot foreclose on its lien and sell a stored vehicle even if the VSF has done everything that is legally required. Bureaucracy at its finest, folks! So, what options do you have when your VSF has a vehicle that is abandoned, ready for sale, but you cannot get title through the usual channels? The answer depends both on the value of the vehicle and on how much money you must invest in the process. This article discusses the process for vehicles that are valued at or less than ten thousand dollars.

            The standard process for VSF lien foreclosure is what is known as a “non-judicial” foreclosure. Simply stated, that term means that you have avoided taking a trip to the courthouse in order to execute the VSF’s lien rights on the vehicle. It is similar in many respects to a foreclosure on real estate where the property is sold at the courthouse steps. In both cases, title to property transfers hands in a “lack of payment” situation without anyone going before a judge. There is, however, another method of foreclosing on the VSF lien known as the “judicial foreclosure.”

            Judicial foreclosure involves filing a lawsuit with the appropriate court and asking that court for an order granting the foreclosure of the lien. Which court you file in will depend on many factors, each of which is very important to getting an enforceable court order. It should be noted that this is not the same process as suing for title to a vehicle (which is only appropriate in a district court or, in some cases, a county court-at-law). Also, as previously stated, this discussion is limited to low-value vehicles (less than $10,000 in value).

           

            Justice courts (formerly known as “small claims courts”) are courts of very limited jurisdiction. Typically, they only hear claims involving $10,000 or less in controversy, whether in a lawsuit, eviction, or debt claims. However, justice courts are also allowed to hear cases where a person seeks foreclosure of a lien on personal property (i.e. not real estate) that is valued at $10,000 or less. In many cases involving damaged or abandoned vehicles, the vehicles will be within that range, giving justice courts the ability to grant the foreclosure request.

            Despite justice courts being able to grant the foreclosure, the process is far from simple. Rules about where to file, who to include in the lawsuit, and how to get the judgment are complex. It is almost always necessary to hire a lawyer for a judicial foreclosure because if you fail to include a necessary party to the proceeding, the court order will not be worth the paper on which it is written. Additionally, the parties involved (whether the justice of the peace, state agencies, or their attorneys and paralegals) will have questions about the proceeding that you will probably not be able to answer. That being the case, it is strongly recommended that you lawyer up for this process.

            Despite this being a bit of a law-intensive process, it is a good solution under many circumstances. First, if you have a vehicle that can’t be sold or junked without a title, it will simply waste away on your property forever. Second, if the DMV in your area is requiring paperwork you cannot get, you are stuck with that vehicle. Third, if there was someone left off the notice letters, you typically cannot go back and “re-notice” them because the delivery timelines have passed. In each of these situations, judicial foreclosure is a good last resort.

            While judicial foreclosure costs more in time and money than non-judicial foreclosure, it can be a handy tool under the right circumstances. It will require an attorney who is familiar with towing and storage laws as well as one who can educate the judge and, likely, opposing counsel on the subject. Finally, like any lawsuit, it absolutely must be done the right way the first time or it will be a fruitless endeavor. If, however, you can get the right person on the job (and typically do this for a few vehicles to get a better price), you can end up with title to vehicles that were otherwise stuck in legal limbo.

No State Income Tax - Vote Yes for Proposition 4 in Texas

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On November 5^th, voters will go to the polls to vote on proposed constitutional amendments that were passed by the Texas Legislature.  In order to be the most informed on each proposal, you can access information at the following link. 

 

https://lrl.texas.gov/scanned/Constitutional_Amendments/amendments86_tlc_2019-11-05.pdf

 

There are 10 propositions that contain the language that will be on the ballot, the easy to understand analyses, and then comments from supporters and opponents.  Although this is a long document, it reads very quickly.  We believe it is a very good tool to  help you decide how you would like to vote.

 

We want to bring Proposition 4 to your immediate attention.  The way the ballot language is written, is confusing.  This proposal would amend the Texas Constitution to prohibit the Legislature from imposing a state income tax on individuals.  If you are opposed to a state income tax, you will want to vote YES on this measure.  Information regarding this ballot proposal is in page 19 of the document.

 

At Southwest Tow Operators, we believe it is important to keep you informed on what is upcoming.  If you have any questions about any of the 10 propositions, please feel free to contact us.

Towing & Recovery & VSF Session- Plano, Texas October 22, 2019

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TDRL’S “BACK DOOR” REGULATION OF INCIDENT MANAGEMENT TOWING FEES

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Written By Brian Edward Walters, Attorney at Law

 

Almost every incident management towing company knows that TDLR does not set incident management towing fees. While those fees can be regulated and capped by the county or a city, TDLR generally has deferred to either an “unregulated” view of incident management towing fees or deferred to the city or county to set those rates. However, lately there has been a substantial uptick in TDLR “back door” regulating the prices charged by incident management towing companies.

 

The Cost of a TDLR Complaint

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    TDLR complaints are a frequent hassle when operating a towing company or vehicle storage facility in Texas.  All that is required for a complaint is for a disgruntled customer to log on and find one item to complain about. It could be something serious like an overcharge or an unlicensed operator or it could be as simple as not having the correct website for justices of the peace on your VSF invoice. Either way, one complaint can trigger a full TDLR investigation of your private property or incident management towing practices.

    In private property tows, complaints typically arise from someone who (rightly or wrongly) believes that they had the right to leave their vehicle on property.  When that happens, they will usually do some ad-hoc legal internet research and find the Texas Towing and Booting Act.  Once they find the Texas Towing and Booting Act, they will try to point to every single problem that they believe exists on a parking facility and use that as the reason they should “never have been towed.” 

    The Texas Department of Licensing and Regulation (“TDLR”) is tasked with investigating consumer complaints. Investigators then reach out to your towing company or VSF and ask for a host of documents.  Many times, the documents that are requested are just a boilerplate list of items that may or may not have anything to do with the tow that generated the complaint.  Remember – investigators are not attorneys.  They typically do not know Texas law.  They also do not know that there are limits on what they can ask for and what goes too far.  Given those facts, it is not surprising that you end up with a shotgun-style approach to what should be a simple and limited investigation. An investigator’s only job is to review the facts and see if they believe a violation occurred. However, a prosecutor (an attorney) is the person who determines whether formal charges will be brought against your license. 

If an investigator determines that there is a likely violation (or feels you are not responsive and cooperative), he or she will forward that complaint to a prosecutor who will determine whether TDLR should bring an enforcement action against your company’s license.  Typically, TDLR enforces against the towing company or vehicle storage facility rather than against one employee who made a mistake. Additionally, once TDLR issues a “Notice of Alleged Violation,” you have very limited time to respond to the allegations and work out any possible deal before the allegations are set for a hearing before an administrative law judge.  Thus, time is of the essence at all phases of investigation and prosecution.

At this point, it is clear that a complaint can quickly snowball into a massive financial drain.  Every moment that you spend working on or defending claims (whether good or bad) is time that you cannot spend making money and growing your business.  The real cost of a complaint is not just the fine that you end up with, it is also the time and money you lose defending against those allegations.  Given that most tows involve a relatively small amount of money, you will quickly burn through the profit margin of a tow defending a complaint and end up with a net loss that can be in the thousands of dollars.

The point of this article is not to intimidate folks in the industry. Rather, it is to make you aware of just how much money can be lost based on what one disgruntled customer can do with 10 minutes to spare and an internet connection.  The best defense in this case is a good offense.  That means that you need to be hyper-vigilant when performing private property tows.