Real Estate: Former Homeowners’ Association President’s Emails were Defamatory

In the Fairfax Circuit Court case of Cornwell v. Ruggieri, the trial judge and jury found that the plaintiff homeowner was defamed by four emails written and published by a former association president and awarded $9,000.00 in damages. These emails alleged that the homeowner had stolen association funds five years earlier. The former association president tried to defend the case on the basis that the statements were simply a matter “of opinion”, not a matter of fact (as required under Virginia case law to recover damages), but the trial judge disagreed.

The trial judge instructed the jury that under Virginia law the defendant, in his role as association president, had a “limited privilege” to make defamatory statements without being liable for damages. However, if it was proved by “clear and convincing evidence” that the defendant had “abused” the privilege, the defamatory statements were not protected. The trial judge instructed the jury that there were six possible ways (outlined below) that the homeowner could prove that the former association president abused the limited privilege.

The homeowner presented evidence that the defendant made statements (1) with reckless disregard; (2) that were unnecessarily insulting; (3) that the language was stronger than was necessary; (4) were made because of hatred, ill will, or a desire to hurt the homeowner rather than a fair comment on the subject; and (5) were made because of personal spite, or ill will, independent of the occasion on which the communications were made.

The jury was given a specific interrogatory with regard to each of the four defamatory statements:

(1) Did the defendant make the following statements?

(2) Were they about the plaintiff?

(3) Were they heard by someone other than the plaintiff?

(4) Are the statements false?

(5) Did the defendant make the statements knowing them to be false, or, believing them to be true, did he lack reasonable grounds for such belief or act negligently in failing to ascertain the facts on which the statements were based?

(6) Did the defendant abuse a limited privilege to make the statement?

For each question as to all four emails, the jury answered “yes”. After a three-day trial, the verdict was rendered in favor of the plaintiff -- $9,000.00 in damages.

This case gives a good reminder that homeowner association board members must be knowledgeable, professional and well-advised when serving their communities.

Bankruptcy: Objection to Discharge - Willful and Malicious Injury by Depriving Access to Secured Collateral

A few years ago I tried a case in the United States Bankruptcy Court, Eastern District of Virginia, Richmond Division, Judge Huennekins, that will be of interest to many lenders who hold a security for their loan. My client was Dominion Credit Union. At the request of the debtor, and, as part of a settlement where the debtor agreed to pay on the judgment rendered, I agreed not to state the debtor’s name.

The factual scenario is as follows: the Credit Union had made a $30,000.00 loan to the debtor in March, 2006 to purchase a pickup truck from Chambers Auto. The loan was secured by this pickup truck. There was no co-signer for the loan, nor was the debtor married. The debtor’s loan application made no reference for the purpose for which the loan was sought. The debtor listed no other owner or user. Within two months the debtor became delinquent. The Credit Union ordered repossession of the truck. The repossession company could not find the truck, and the debtor offered minimal cooperation, claiming only that another person had the vehicle and took it out of state. The debtor referenced the name of the person, Michael Chambers (this name became important years later, but note that the name of the company from which she purchased the vehicle was Chambers Auto). The debtor did provide a telephone number for Michael Chambers. The repossession company made several attempts to repossess the truck, checking at the debtor’s residence on various days and at various times, but to no avail. Calls were also made to Michael Chambers. On one occasion Mr. Chambers said that he was out of state, and, that he was also in the repossession business. With no luck at repossession, the Credit Union retained me to obtain judgment against the debtor and try collection. While judgment was obtained for over $29,000.00 plus costs, interest and attorney’s fees, collection was difficult, as the debtor was constantly in school and working only part-time. Finally in early 2010 I found the debtor working a sufficient number of hours to garnish, and issued the garnishment. As a result of the garnishment, the debtor filed a Chapter 7 bankruptcy case in March, 2010, seeking discharge of all of her financial obligations – at this point in her life the debtor had accumulated some other debt as well, and was finally about to complete her schooling and become a full time nurse. I advised the debtor’s attorney that I would be objecting to the discharge of this debt based upon the fact that we had been unable to obtain the truck since May, 2006, and that we had obviously lost money due to the debtor’s willful and malicious injury to the Credit Union by depriving it access to and repossession of the collateral securing its loan pursuant to Bankruptcy Code Section 523(a)(6). The debtor’s attorney responded by stating that the truck would be surrendered. Weeks passed without the debtor surrendering the truck, so I filed an objection to the dischargeability of the debt. Subsequently the truck was returned, but in horrible condition, having limited value, resulting in a substantial loss to the Credit Union.

To prepare for the trial of the case I conducted written discovery and scheduled depositions of the debtor and Michael Chambers. Depositions were scheduled on several dates. On the first date both parties appeared (although almost an hour late), even though I had only subpoenaed the debtor. I excluded Mr. Chambers from the debtor’s deposition – important because Mr. Chambers tried to “control” the proceedings. At the debtor’s deposition she stated, for the first time, that the truck was purchased as a business deal with her brother (although not an actual blood brother, but someone just like a brother, named “John Jones”). She and Mr. Jones had a “falling out” and he left with the truck, never to have contact with him again, and not knowing where either he or the truck was. The debtor denied telling the Credit Union or the repossession company that Michael Chambers had it. The debtor admitted that she and Mr. Chambers were now boyfriend and girlfriend, although she was not sure when this relationship commenced, although probably within six months of the loan. The debtor admitted that Chambers Auto was a family business, but that Michael Chambers’ father ran it. The debtor stated that when it became apparent that she would not be able to get a bankruptcy discharge without surrendering the vehicle to the Credit Union, Mr. Chambers (who had a “questionable” past and had “questionable” connections) “put the word out on the street”, and magically the vehicle was returned to Mr. Chambers. The debtor also stated that they tried their best to put the vehicle back in decent shape, but ran out of time. Following the debtor’s deposition, I tried to immediately take Mr. Chambers’ deposition, but he and the debtor said that they had no time and had a child care problem. A new date was set for Mr. Chambers’ deposition. However, he failed to show on that date. I advised the Court of this lack of cooperation, asked for a continuance to obtain the necessary evidence to prove my case. The Court granted the continuance and set a new trial date. I then set a new deposition date for Mr. Chambers, who, this time did show up, although about an hour late again. Mr. Chambers’ testimony was similar, but somewhat inconsistent with that of the debtor in some key areas.

On the trial date Mr. Chambers’ failed to appear in Court despite subpoena. His deposition was submitted into evidence, and the Court issued a Show Cause summons against him for his non-appearance. After hearing all of the evidence, the Court ruled that the debtor did willfully and maliciously injure the Credit Union by depriving it access to and repossession of the collateral securing its loan pursuant to Bankruptcy Code Section 523(a)(6), and awarded non-dischargeability to the extent of the Credit Union’s reasonable loss based upon the debtor’s conduct.

The lesson of this case: be diligent about repossession efforts, document all events, and if the debtor deprives you of the security and attempts to discharge the debt in a Chapter 7 bankruptcy case, object!

Collections: Attacking Fraudulent Conveyances

It seems to happen more and more often. You are able to obtain your judgment against your debtor, but when you go to collect, he has recently transferred his assets. Can you pursue the assets to the transferee? Under the right circumstances, yes.

The case of Price v. Hawkins, from the Newport News Circuit Court, appealed to the Virginia Supreme Court, stands for the position that a court may enter personal judgments against a transferee to provide a creditor with a remedy when, due to fraud, there is no other remedy.

In Price the Court found that the debtor, a father, enlisted the help of his son and his son's girlfriend in the debtor's scheme to defraud his creditors. Specifically, the son and his girlfriend, who were not legitimate creditors of the debtor, assisted the debtor in hiding assets ($14,058.77) that the creditor would have otherwise reached in his judgment collection efforts. The transfers occurred after the judgment order was entered, and $10,000.00 was transferred to the son and the girlfriend three months later while the creditor was attempting to collect on the judgment.

The Court found that simply declaring the fraudulent transfer "void" pursuant to Virginia Code §55-80 would be meaningless, as the conveyance was of money. In cases involving the fraudulent conveyance of real estate, title to the real estate is restored by a declaration, thus, subjecting the property to a creditor's bill. The Court ruled in Price that unless the money was delivered to the Court for the creditor to attach, then personal judgments were the only remedy.

Perhaps the lesson of Price is: Ask questions! When your debtor is under oath for interrogatories, ask what assets have been conveyed to whom, when, and for what consideration.

Foreclosure: Obtaining Possession after Foreclosure

Upon purchasing property at a foreclosure sale, it is not uncommon to have a “holdover tenant”. If this occurs, you can obtain possession of the property by filing a Summons for Unlawful Detainer in the appropriate General District Court. The applicable statute requires that the plaintiff prove “a right to the possession of the premises at the time of the commencement of the suit.” The only evidence that is usually required is (a) a copy of the recorded trustee’s deed, since the facts recited therein are prima facie evidence of their truth, and (b) a copy of the notice to vacate sent to the occupant(s).

On the date of the initial return, if the defendant fails to appear, possession will be granted. If the matter is contested, most courts set a new date for trial. In contested cases, issues are usually related to notice and service, so the trustee should be prepared to present evidence that the foreclosure sale was properly advertised, noticed and conducted.

The judgment for possession is not final until 10 days after it is entered, and most courts will not issue a writ of possession during that 10-day pendency. If an appeal is noted within the 10-day period, the defendant must perfect the appeal by posting an appeal bond and paying within 30 days of the date of the judgment the applicable writ and service fees for the circuit court. Most judges are sympathetic to require significant appeal bonds equating with the former mortgage payments. 

Eviction is accomplished using a “Request for Writ of Possession.” A writ of possession may be issued on an unlawful detainer for up to one year from the date of judgment. When requesting the writ of possession, provide contact information for both the Sheriff and the person who will supervise the eviction of the new owner; the Sheriff will coordinate a date and time to serve the writ of possession and maintain the peace while the owner physically evicts the personal property of the occupant(s) and secures the property.