Tow Hearing Filing Defect Checklist
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Justice Courts in Texas are about to double their amount in controversy jurisdiction. SB 2342 and its companion in the house, HB 3336, increased justice court amount in controversy jurisdiction from $10,000 to $20,000. This change takes place on September 1, 2020.
This bill’s authors argued that increased access to Texas court systems was necessary due to frustration with the current system. Specifically, the authors cited the “ever-increasing cost of civil litigation” and Texans’ right to access to courts.
“Every Texan, no matter their background or economic status, has the right to access a court to peacefully resolve a legitimate civil dispute. The ever-increasing cost of civil litigation, however, limits the ability of many Texans to access the civil justice system, creating frustration with the system and, in some instances, causing unacceptable delays in resolution of disputes or leaving disputes unresolved altogether. C.S.S.B. 2342 addresses the issue of the increasing cost of litigation by allowing justice of the peace courts and many county courts at law to handle somewhat larger civil disputes and by providing that the Supreme Court of Texas is required to promulgate rules to expedite the resolution of civil disputes having $250,000 or less in controversy, which expands an existing requirement to expedite cases having less than $100,000 in controversy.”Bill Analysis – S.B. 2342
While this amendment will allow claims with a higher amount in controversy to be heard in justice courts, it does nothing to address the fact that access to a court system is not the same as having a fair shot at prosecuting or defending a claim. Additionally, and arguably problematically, this amendment increases an amount in controversy in a court system in which over 90% of the judges did not attend law school and only 7% of whom are licensed to practice law without requiring any additional training or education for those judges.
Consider a hypothetical plaintiff who files a claim in justice court for $18,000 (assume it is filed after this law is effective). Assume that this plaintiff files this claim pro-se (without a lawyer) in order to keep his or her costs down. At every step, the justice court tells the plaintiff that it cannot give him or her legal advice. The defendant in this case hires an attorney with 10 years of courtroom experience to defend against the plaintiff’s claims. The defendant does so because a potential $18,000 judgment more than justifies him or her hiring that lawyer.
As soon as the defendant hires a lawyer and the plaintiff continues pro-se, the plaintiff is in trouble.
The plaintiff is in trouble because “access” to the courts (the goal of the bill’s authors) is not the same as having a fair shot and equal chance at trial. Prosecuting a case pro-se with a licensed attorney on the other side is rarely, if ever, a fair fight. The Texas Supreme Court has held that a pro-se party his held to the same standards as a licensed attorney. This means that even though the pro-se plaintiff will almost certainly have nowhere near the training, experience, and know-how as the defending attorney, the court is required to hold them both to the same standard in relation to filing requirements, meeting deadlines, knowing the law, and understanding the rules of procedure.
A good analogy might be to give someone “access” to a football field and hand that person a football. That person is then told that all he has to do is get the football to the other end of the field. If he does that, he wins! However, there is just one catch – there will be one defender that the other team has hired – and that defender just so happens to be a professional NFL player with 10 years of experience on defense. Does anyone really believe that this hypothetical would be fair simply because the person with the ball was given access to the field?
Much work remains to be done in order to fix the justice gap in Texas. However, opening the door to the door to the peoples’ court a little wider by doubling the jurisdictional limit of justice courts does not solve the problem. If anything, it just creates more opportunities for pro-se litigants to be tackled.
The following article is for those who are truly interested in learning as much information as possible on the concept of “probable cause” in justice court tow hearings. It reviews each case (through late 2019) in which “probable cause” is analyzed by Texas courts and provides a suggestion on how to remedy this term’s vagueness through statutory amendment.
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VSF inspections are triggered by one of two events. Either it is just time for your periodic inspection (which is required at least once every two years) or an inspection can be the result of a complaint filed against your vehicle storage facility at TDLR. Regardless of the cause of the inspection, there are several rather simple things you can do to properly prepare for a VSF inspection.
First, be aware of when your “every two years” inspection is coming up. You may not receive notice from TDLR of when you will be inspected, but you can make a fairly good estimate of approximately when it will occur based on your last inspection date. For example, if it has been 18 months since your last inspection, the odds are just about certain that your inspection will occur in the next 6 months.
Second, look at what TDLR uses when they inspect your facility. A VSF inspection checklist is available on our website HERE. While many VSFs do not utilize this document, it is effectively you being given the answers to part of an examination that you know you will have to take. Why any person would choose not to study and review the TDLR VSF Inspection checklist is a mystery, but it happens. It is highly recommend that you conduct a personal inspection using the checklist – it will help you not only familiarize yourself with the VSF inspection process, but it will shed light on areas where you may find that you have problems. If those problems are capable of being fixed before the inspection, you will have saved yourself thousands of dollars in administrative fines.
Third, know where your documents and records are and be absolutely certain that they are complete. If you store your records off-site, you should be certain that those off-site records will be easy to locate and bring to your VSF. If you store records on site, you should ensure that you have met the minimum information and document retention requirements under Texas law.
Fourth, remember that an inspector is not a lawyer and may not be the end-all authority on towing and storage laws in Texas. We have heard many complaints that sound like this, “The inspector was out here last time and said that my signs were fine!” That may well be the case, but you should always remember that it is a prosecutor (a licensed attorney at TLDR), not the inspector, who makes the final determination on when to prosecute a violation and when a violation will be alleged to have occurred.
Fifth, be polite and cooperative. Some inspectors are professional and, from time to time, some are less than professional. However, regardless of how the inspector behaves, you should always maintain a cool and professional approach to inspections. This is, after all, an examination of your business that the state has given you a license to conduct. That license, like all other licenses, can be forfeited if the state determines you have failed to follow the law or applicable regulations. If a violation is found, that does not mean that you have already lost. It simply means that a non-lawyer representative of the state believes, based on his or her personal opinion and knowledge, that your vehicle storage facility failed to follow the law. It is certainly not a finding of guilt or liability.
Finally, you should familiarize yourself with the law! Even if you are not a lawyer, operating a vehicle storage facility in Texas requires a good deal of understanding in relation to both the Texas Vehicle Storage Facility Act, the Texas Towing and Booting Act, and the administrative rules that govern vehicle storage facilities and towing companies. To a certain degree, an inspection will be a test of your knowledge of those laws. If you do not know what you need to write down, what documents you need to keep, or what you need to do to charge a fee for a particular service, you will likely find yourself on the receiving end of a TDLR administrative violation.
Tow Hearings were designed to be a quick and easy judicial remedy. The idea was that if a car was towed, a vehicle owner could go to court, apply for a Tow Hearing, talk to a judge, and the judge would make a determination of whether or not probable cause existed for the removal of your vehicle (assuming, of course, that overcharging is not an issue). At that point, one party wins and the other loses. Unlike a traditional lawsuit, Tow Hearings have quick deadlines and no discovery. Unfortunately, there is very little that is “quick and easy” under the law, and a Tow Hearing is no exception. This post reviews a few common mistakes at Tow Hearings .
Most people do not realize that the term “person” is defined by law in Texas. See Tex. Gov’t. Code § 311.005. It does not just mean a human being (commonly called an “individual” in legal terminology). The term “person” in Texas encompasses a corporation, limited liability company, a partnership, and many other business entities and structures. Id. Additionally, business entities and individuals in Texas can operate under assumed names, which may be found either in the county records, at the Secretary of State, or both depending on the type of business.
In the case of a Tow Hearing application, that means a vehicle owner is looking for three “persons.” First, the vehicle owner must name the towing company, which can be an individual operating as a “DBA” or a formal business entity such as a limited liability company or corporation. Second, the vehicle owner must name the vehicle storage facility, which again can be an individual or a business entity. Finally, the vehicle owner must name the parking facility owner or law enforcement agency that authorized the tow. If a parking facility owner authorized the tow, that “person” can be an individual but it far more frequently a business entity designed to protect the individual owner from liability. If the person that authorized the tow is a law enforcement agency, then the vehicle owner will have to name the law enforcement agency (such as the Sheriff, DPS, or local police). Tex. Occ. Code § 2308.456(b)(4).
If the vehicle owner fails to properly name all the parties to the Tow Hearing, the TTBA states that the vehicle owner has “waived” its right to request a hearing. While some justice court judges may not abide by the law on this subject, it is important to point out these defects. Just as a vehicle owner may focus on nuances of towing sign height, language, and location, a towing company, vehicle storage facility, and parking facility owner may point out procedural defects in a vehicle owner’s request for a Tow Hearing. After all, it only makes sense that a vehicle owner who a towing company or property owner to comply with the law should likewise have to comply with the TTBA’s filing requirements.
A request for Tow Hearing must be submitted the court “before the 14th day after the date the vehicle was removed.” See Tex. Occ. Code § 2308.456(a). The Texas Towing and Booting Act provides for very limited exceptions to this rule. Additionally, the language of the statute is not entirely clear on how the 14 days are calculated.
Tex. Occ. Code § 2308.456 spells out what must be in a request for Tow Hearing. These are not optional. The statutes specifically state that a request for tow hearing must contain the items in § 2308.456(b). The statutes go on to state that a person who fails to deliver a request in accordance with § 2308.456(a) waives the right to a Tow Hearing. See Tex. Occ. Code § 2308.456(d). Thus, if an applicant for a Tow Hearing misses items or deadlines, he or she could potentially lose the hearing before it even begins.
It is always important to review filing requirement under the Texas Towing and Booting Act BEFORE requesting a tow hearing. The right to a Tow Hearing is granted under the TTBA only if a plaintiff satisfies the minimum filing requirements. If those requirements are not met, the right to the hearing is waived.
For all filing entities in Texas, forfeiture of a corporation, LLC, or other filing entity’s corporate privileges in Texas occurs when (1) the filing entity does not file the report required by Chapter 171 of the Texas Tax Code; (2) the filing entity fails to pay its franchise taxes (a.k.a. margin tax) within 45 days after the notice of forfeiture is mailed to the filing entity; or (3) when the filing entity does not permit the Texas comptroller to examine the filing entity’s records pursuant to the Texas Tax Code. Forfeiture is extremely common in Texas. When our firm submitted an open records request for all forfeited entities at the Texas Secretary of State’s office a few years ago as a research project, it took two separate Excel spreadsheets with thousands of entries to describe the number of forfeited filing entities in Texas. Keep in mind, this open records request only dealt with forfeited entities in the last ten (10) years.
While forfeiture of corporate privileges is an all-too-common occurrence in Texas, few businesses realize the significance of forfeiture and its potential negative impact on not only the business but its officers, directors, and governing persons. Tex. Tax Code § 171.252 states that if a corporation’s privileges are forfeited, the corporation is denied the right to sue or to defend a lawsuit in a Texas court. Additionally, and equally important, § 171.252 states that each officer and director of a forfeited corporation is liable for the debts and obligations of the forfeited corporation (subject to § 171.255). Given that the corporate liability shield is one of the most important protections people seek when incorporating, one would think that this would be enough to get everyone on board with making all their filings in a timely manner. Unfortunately, that is frequently is not the case.
Making matters worse, the liability shield being removed can result in administrative agencies taking action directly against and imposing fines directly on the officers, directors, and managers of a licensed business. Given the strict standards to which most agencies holds licensees, the “corporate shield” being down can result in enforcement actions against individuals who may not even be actively involved in that business. Thus, unlike an unlicensed business, licensed business entities have a substantial additional incentive to keep their shields up.
Why is Forfeiture of Corporate Privileges so Common in Texas?
In our experience, there are a several contributors to corporate privileges forfeiture in Texas. First, many businesses simply don’t keep up with their mail. The Comptroller contacts businesses via mail to give them advance warning of forfeiture. The Comptroller gives a number of notices prior to requiring the Secretary of State to forfeit the filing entity. Despite these repeated notices, many of these notices go unnoticed.
A second contributor to forfeiture in Texas is simply a lack of understanding of a business’s obligations. The repeated modifications to the Texas Franchise Tax have caused confusion about when reports are due and who must file a report. Generally, all taxable entities must file annual reports (with very few exceptions). Nevertheless, many businesses believe that if they do not owe franchise taxes, they do not need to file anything.
The third contributor to forfeiture is a business simply failing to file an annual public information report along with its franchise tax return. Many businesses fail to file a complete return (including the annual report) which prevents the Comptroller from accepting the filing. Thus, despite filing its proper form for indicating whether or not it owes taxes, the business simply failed to attach the information report which the Comptroller requires.
Lastly, many business owners in Texas use forfeiture to “wind down” their business. Rather than going through the process of winding down the business through filing a certificate of termination, the owners simply let the business go into forfeiture. Given the potential liability issues inherent in forfeiture, this is obviously a terrible way to wind down a business, particularly given that if a business is properly wound up, the Texas Business Organizations Code may allow it to retain its liability shield. Further discussion of the forfeiture/termination issue as it relates to winding up a business is reserved for another article.
Just as Texas grants the owners of filing entities a liability shield via the Texas Business Organizations Code (or predecessor statute), so can Texas remove that shield via the Tax Code. The bottom line is that business owners in Texas rarely give forfeiture the consideration it merits. More often than not, forfeiture of corporate privileges is discovered during some crucial moment (purchase/sale of a business, filing of a lawsuit, etc.), resulting in owners and attorneys scrambling to reinstate the business entity’s privileges.