Small Claims: What to expect when you're expecting a lawsuit

Nothing in this blog post constitutes legal advice. It is posted merely for informational purposes only. For specific questions about a small claims issue, the reader is encouraged to seek private legal counsel to whom all of the facts may be divulged. Nothing here gives rise to an attorney-client relationship or privilege.

            In general there are two types of court in America. One is what we see on television, be it in a weeknight drama, or on court T.V. showing the trial to the year for an over publicized event. The second is where many cases turn up, and that is small claims court. In this blog post I will write about the small claims process in a general overview, touching on how to file the case, when a litigant should get an attorney involved, how to defend a case, and how to collect on a judgment.

            In Indiana small claims court is for cases of eviction where back rent owed is less than $6,000.00, accounts payable totaling under $6,000.00, for property damage not more than $6,000.00, and almost any other case where the damages to collect will not surpass $6,000.00.

            The draw of small claims for most people is that there is very little by way of rules of evidence and there is no jury. Therefore, the judge, who knows the rules of evidence can make a decision about what should be given evidentiary weight and what shouldn’t. Another reason a litigant may want to go into a small claim rather than a case on the plenary docket is that the need for a lawyer is lower than in a case for the plenary docket. And thirdly, cases in small claims go through the litigation process much faster and trials are conducted much sooner than one could reasonably expect from plenary courts.

            First, I’ll write about what a plaintiff in a small claim can expect and later from a defendant’s perspective in the state of Indiana

Small Claims in the eyes of a Plaintiff

            Someone is renting an apartment unit from you and hasn’t paid in two months, or someone borrowed your entire collection of Doctor Who DVDs, hasn’t returned them, and claims they’re lost, or you performed a service for someone who didn’t pay you. In each of these scenarios and countless others, so long as the amount owed is less than $6,000.00 (hereinafter 6K), you may decide to take a person to court to recover the money or property lost.

            In Indiana you my walk in to the local courthouse and fill out a Notice of Claim form, or in the case of eviction, a Small Claims Eviction Complaint. Once it is filled out to the best of your ability to describe the nature of the case and the wrong done to you, you hand it to the small claims Clerk, pay a filing fee (except in very limited circumstances), and the court will serve the defendant. At that time you will also be given a time and date at which both the plaintiff and defendant will have their first hearing in the court.

            The first hearing for an eviction is a little different than for other types of small claims cases. So here I will split the two apart and write about each in turn.

Eviction

            The first hearing in an eviction is a possessory hearing where the court will determine whether there is cause to evict the tenant. Both the plaintiff and defendant will be given a chance to explain their position, and if the landlord/tenant laws or the terms of the lease were violated by the tenant, the judge may order that the defendant remove himself and his possessions from the property by a certain date, or to cure the breach. That’s it for the first hearing, however, if the terms of the lease or the landlord/tenant laws were not violated by the tenant, then it is reasonable to expect that the Court will not order the defendant to vacate the premises. If that happens there will be no second hearing, but if the tenant is at fault, the second hearing will be scheduled for some time down the road depending on how busy the court is.

            The second hearing in an eviction is to determine how much the former tenant owes the landlord for back rent and/or damages to the property that had to be fixed before it could be re-let. At the second hearing the landlord will be allowed to present evidence of past due rent as well as any damage to the property beyond normal wear and tear which the landlord had to fix. The former tenant will also be allowed to present evidence of his own to show the condition of the premises on the day he left, which is why it is always a good idea for a tenant, immediately before vacating the premises for good, takes pictures of every nook and cranny of the property as well as any appliances that are staying on the premises after the tenant leaves.

            Once a dollar amount of back rent and other damages is established the Court will reduce that to a judgment in favor of whatever party the Court determines to be in the right, and that is where eviction stops to divert from any other small claim.

Other Small Claims

            The first hearing in any other small claim will usually be uneventful. The judge or court staff person will most likely tell you to go out into the hall to see if there is any way to get the defendant to own up to the debt and work out a payment plan. If you can work out a payment plan with the defendant, then that’s as much as you need to worry about. The plaintiff will then put the amount to be paid and the frequency of that payment until the debt is satisfied into an agreement signed by both parties, have the judge sign it, which then makes it a court order, and everyone is on their way.

            If, on the other hand, the plaintiff and defendant cannot come to an agreement, or if the defendant denies owing any such debt that is the basis of the suit, the parties and the Court will have to set a time for a contested hearing. Again, depending on how crowded the court docket is, a contested hearing could be set for a few weeks or a few months in the future.

            At the contested hearing it will go much like a first or second hearing in an eviction. Each side will be sworn in and given the opportunity to present evidence, the rules of evidence are mostly ignored, and the contested hearing should last no longer than an hour. If the presentation is overwhelmingly in one party’s favor, the judge may issue a ruling from the bench after the close of evidence and any summation either party may choose to give. Or, the judge may take the facts and evidence provided under advisement and will issue a ruling on the matter after a few days or weeks.

            Assuming that the judge rules in the Plaintiff’s favor there will then be a need to collect the amount owed by the Defendant. That is usually done by way of proceedings supplemental to a judgment (PS). A PS hearing will be set for a few weeks or months in the future where the winning party asks questions of the Defendant under oath about assets and income that can be used to satisfy the judgment. In Indiana it is not unlikely that a Defendant may have his wages garnished (up to 25% of total take home pay). Other means of ensuring that a judgment is paid may be to place a lien on property owned or on bank accounts. A lien doesn’t give the prevailing party the right to take that property, but restricts the Defendant’s ability to transfer good title to that property, and in the case of bank accounts, will restrict access to the money in that account. Once the judgment is satisfied the Plaintiff must have the liens removed from whatever property they are attached.

Small Claims in the eyes of the Defendant

            Now assume you receive a summons in the mail stating that you are being sued by the Plaintiff in the action titled at the top of the document. It says that you owe a certain amount based on the assertion of the Plaintiff of money owed, property taken, or non-payment of rent under $6,000.00. On the notice of claim it will state the time and place where you are expected to show up for an initial hearing. If the entity being sued is a corporation or company, that corporation or company is required to be represented by an attorney, individual parties may represent themselves if they choose.

            As stated above, the initial hearing is basically for you to meet with the Plaintiff, or Plaintiff’s attorney, to see if there is a settlement to be had. However, you may raise defenses or counterclaims against the Plaintiff at this initial phase if there are any to be had. Common defenses in the era of third party debt buyers are plenty fold, but I will mention just a few here that are most common.

1.      Indiana Trial Rule 9.2 states that any suit based on a written instrument must have that written instrument attached to the pleadings. This is a fairly common sense rule, but one that is constantly ignored by Plaintiffs and Plaintiff’s attorneys, especially when there is a third party debt buyer who simply cannot present such a written instrument.

2.      Indiana Trial Rule 11 states that any affidavit must be acknowledged by a party with personal knowledge of the facts testified to in that affidavit. It is very often the case that employees of Plaintiff are made to fill out these affidavits of debt when they have absolutely no knowledge of what the underlying account is, or against whom the suit was filed.

3.      Wrong Defendant. Say Bob Smith lives in Indianapolis Indiana, he has a few credit cards, but is current on all of them. Another Bob Smith lives in Zionsville, Indiana, has multiple debts for which he has fallen behind in payments. Citi is one of Bob Smith of Zionsville’s (Bob Smith Z) creditors and attempts to locate him to pay the past due amounts. After so many months of sending out correspondence to Bob Smith Z, calling him without getting an answer, and other frustrations of trying to collect on the account, Citi charges off the debt and sells it to a collection agency for less than the amount owed. The collection agency is located in Chicago, and sees that there is a Bob Smith who is a customer of Citi living in Indianapolis, so Acme Collections files suit in small claims court in one of the Indianapolis small claims courts. Bob Smith of Indianapolis (Bob Smith I) receives a summons to appear in court. Bob Smith I should move to dismiss the case because he never had an account with Citi with the account number associated with the debt, or lived at an address listed on the account, or any other means he can demonstrate that they have the wrong guy. But for God’s sake, no one should ever ignore any documents sent to them from a court, it is so much easier to defend a case than to have a judgment overturned at a later date!

4.      Statute of Limitations. Very often when a debt has passed the relevant statute of limitations, creditors or debt buyers will attempt to sue on the debt despite the limitations period having run out. This is simply because the court will not enter a defense for you even if the court notices that the statute has run out, and if the claim is reduced to a judgment a whole new and different statute of limitations begins to run. Also, if the Defendant doesn’t know that the statute of limitations has run out, any agreement made by the Defendant with the Plaintiff to make payments on the debt will start a new statute of limitations once that agreement is reduced to a judgment as well.

-          For the benefit of defendants everywhere, and because Pasztor & Coe will not accept a matter for collections if the statute of limitations has run out, I will list the various time limits for certain debts in Indiana here:

·         Written contracts: 10 years

·         Oral contracts: 6 years

·         Promissory notes: 10 years

·         Open accounts (including credit cards): 6 years (links below)

Defendants have a great luxury to be creative in ways to defend against a debt, one that is owed, or otherwise. It is important to remember that Plaintiffs have the burden of proof when it comes to whether or not you owe a debt (as in almost all things), so admission is never in the best interests of a Defendant. To be sure, Plaintiffs also have a myriad of ways to be creative in pursuing a debt, owed or otherwise, that many consumers fall victim to before they realize it.

So, you are a Defendant, and you are not liable for the debt for which you were sued, what do you still have to do? In many cases, nothing. The suit goes away, and you are left to lead a happy life. However, when a Defendant argues a successful defense often times the Plaintiff’s attorney will offer to dismiss the case without prejudice. Dismissing a case WITHOUT prejudice means that it can come back later and sue you again, or another debt buyer can do so. If presented with an offer to dismiss without prejudice it is in the best interest of the Defendant to politely decline the offer and insist on a dismissal with prejudice. If you agree to a dismissal without prejudice plan on wasting more of your time with this debt at some point in the future.

Defendants in Eviction

            Many people often ask if they can withhold rent until repairs are made, or until the landlord does something he promised to do. The short answer is no, a tenant may never withhold rent. If a tenant withholds rent, that tenant will be a Defendant in an eviction proceeding very soon. If you have been withholding rent, and you are being sued, the only way to avoid getting kicked out of your home is to have the money in hand before the hearing, and ready to be paid in full. So long as you are in compliance with all of the terms of a lease, you have a defense to any eviction proceeding.

            This will tie in to a later blog post on landlord/tenant law, but it bears repeating here. If there is a breach of the lease, any term of the lease, or any implied or express warranty made in or because of the lease, by the landlord, the means of correcting that breach is in the small claims courts. To reiterate an important point, withholding rent is not the means to seek redress for a grievance with the landlord.

 

Should you have a lawyer?

            As mentioned above, corporations and companies must be represented by an attorney in small claims in Indiana. In many cases individual litigants choose to represent themselves simply because the dollar amount of the lawsuit doesn’t warrant the expense of hiring an attorney. But there are many instances where it is always advisable to engage the services of an attorney, and here I will list a few of those.

1.      Landlord/tenant or eviction. If you are a tenant suing over the breach of the lease by the landlord, there is likely a provision of your lease that says that a prevailing party in any litigation arising from that lease will be granted reasonable attorney’s fees. Your landlord may have only included a provision for attorney’s fees if the landlord is the prevailing party, but your lawyer may argue to the Court that such a one sided provision on attorney’s fees, in favor of the party will all of the bargaining power, is unjust and should thus apply to either party, whichever should prevail.

Landlords suing over the breach of any provisions of a lease should hire an attorney for the exact same reasons, and any lease should contain an attorney fee provision so you don’t have to spend all of your time in or preparing for court rather than managing and maintaining your rental property.

2.      Matters of consumer protection. Contracts entered into by consumers generally always have attorney fee provisions, and if you’re lucky enough to get such a contract without a binding arbitration clause, so much the better. Other consumer protection laws that have statutory attorney fee provisions are Indiana Unfair and Deceptive Acts and Practices (UDAP), the federal Truth in Lending Act (TILA), the Equal Credit Opportunity Act (ECOA), among others.

3.      Collections. This may restate the above in that most entities that will sue for collections will be a corporation or a company, but in all consumer sales, credit, leases, or any other contract should have attorney fee provisions.

4.      Matters of lost or damaged property. In the case of lost property, or unreturned property legal theories on conversion, trespass to chattel, subrogation, among others may come into play. It should not be incumbent on everyday Americans to have to know what all these mean, and it is the job of attorneys to deal with these issues, hiring a lawyer will ease the burden, and let you get back to your life. For damaged property issues of liability, as well as comparative or contributory negligence. All factors that while anyone may learn over the course of some months, your attorney has studied and is able to argue them succinctly given the limited amount of time granted for small claims hearings.

5.      The only reasons not to hire an attorney to represent a plaintiff in a small claim is if the amount claimed does not make economic sense to incur such an expense, and there is no means of collecting attorney’s fees from the Defendant. The only reason for a Defendant not to hire an attorney in a small claim is if the Defendant knows that the money is owed, there is adequate documentation to support the debt, and there are no defenses to be raised by the Defendant.

Small claims is a being unto itself. It is fast paced, and fluid. It is, by its nature, easy to fall through the cracks and get lost in the turmoil. A small claims judge may see hundreds of people in a day, and not one of them may stand out in the crowd. This blog post was intended to give an introduction to the world that is small claims practice in the State of Indiana. It is highly recommended that if one is considering the prospect of filing a small claim as a plaintiff, or if one is named as a defendant in a small claim that you speak with an attorney who has experience practicing in the small claims arena, if for no other reason than to understand the process. It is my sincere hope that this post has explained some of that process so when you speak to an attorney, or when you go to court, you will be better informed than you were before.

Nothing in this blog post constitutes legal advice. It is posted merely for informational purposes only. For specific questions regarding a small claims issue, the reader is encouraged to seek private legal counsel to whom all of the facts may be divulged. Nothing here gives rise to an attorney-client relationship or privilege. The author is licensed to practice in the state of Indiana. Laws vary by state and region. Furthermore, the law is constantly changing. Thus, the information above may no longer be accurate at this time. No reader of this content, client or otherwise, should act or refrain from acting on the basis of any content included herein.

Links: http://www.bankrate.com/finance/credit-cards/state-statutes-of-limitations-for-old-debts-1.aspx