Bankruptcy: Recorded Judgment Honored

The Virginia Supreme Court held in Leasing Service Corp. v. Justice that a judgment creditor, who recorded its judgment prior to the debtor filing its bankruptcy petition, would not be prevented from a post-discharge enforcement of its lien upon the debtor's real property interests in jurisdictions that were acquired before the commencement of the bankruptcy proceedings. Specifically, the Court ruled that the lien was not paid off or discharged in the bankruptcy proceedings, and could not be ordered released pursuant to Virginia Code §8.01-455. Therefore, the judgment continued to be a lien on any interest that debtor may have had in land located within that county, despite his bankruptcy discharge from personal liability in the payment of the judgment.

The lesson of Justice is that you should always promptly docket your judgments where you believe that the debtor owns or may own property.

Collections: Uniform Enforcement of Foreign Judgments Act

Virginia and almost all other states have adopted the Uniform Enforcement of Foreign Judgments Act (UEFJA) (Virginia Code §8.01-465.1 et seq.). In so doing, creditors may enforce out-of-state judgments by properly filing the foreign judgment in a Virginia Circuit Court. Virginia Code §8.01-465.2 states:

The Clerk must treat the foreign judgment in the same manner as a judgment of the circuit court of any city or county of this Commonwealth. A judgment so filed has the same effect and is subject to the same procedures, defenses, and proceedings for reopening, vacating or staying as a judgment of a circuit court of any city or county of this Commonwealth and may be enforced or satisfied in like manner.

As creditors it is important to be aware that out-of-state judgments can be enforced in Virginia, and that Virginia judgments can be enforced in foreign states, provided that the state has adopted the UEFJA.

In Virginia, Virginia Code §8.01-465.5 allows bringing an action to enforce an out-of-state judgment in lieu of proceeding under the Uniform Act, if you so desire. Virginia Code §8.01-389(B) states:

Every court of this Commonwealth shall give such records of courts  not of this Commonwealth the full faith and credit given to them in the courts of the jurisdiction from whence they come.

Virginia Code §8.01-252 states that an action brought in Virginia to enforce a judgment rendered in another state shall not be barred by the laws of the other state. The Code bars action upon a judgment rendered more than ten years before the commencement of the suit.

In the case of Atlantic Funding Corp. v. Peterson, the Fairfax County Circuit Court granted a debtor's motion to quash debtor interrogatories because the creditor had failed to file the federal judgment pursuant to the UEFJA, and thus, the Clerk of the Circuit Court could not treat the federal judgment as a judgment of the Virginia state court.

Virginia Code §8.01-447 governs the docketing of judgments and decrees of federal district courts in Virginia state courts. That provision clearly requires the Clerk of the Circuit Court to treat it in the same manner all judgments rendered within the Commonwealth when docketing judgments. The statute speaks only to the process of docketing judgments, however. It does not necessarily provide a method of enforcing docketed judgments, and it does not authorize the clerk to treat docketed judgments from local federal courts as docketed judgments of this circuit court.

In Peterson the Fairfax Circuit Court ruled that unlike Virginia Code §8.01-447, the UEFJA clearly requires identical treatment and enforcement of properly filed federal and state court judgments. Had the judgment creditor properly filed the judgment of the District Court, the Clerk of the Circuit Court would have been compelled to enforce that judgment as a judgment of the Circuit Court. The Fairfax Circuit Court ruled that the record in Peterson, however, revealed that the creditor failed to authenticate the District Court judgment, or to pay the fee prescribed in Virginia Code §14.1-112(22). The Court ruled that since the creditor did not properly file the District Court judgment in Peterson it was not entitled to the benefits of the UEFJA.

Foreclosure: Sale Deficiency Actions

Frequently there will be a deficiency balance after the sale is completed and the accounting is done.  The account of sale will set forth the distribution of the sale proceeds and also establish any amounts remaining due on the indebtedness following application of the net proceeds from the foreclosure sale.  This deficiency amount is usually recovered by a personal judgment against the maker of the promissory note or other obligors on the indebtedness that was secured by the deed of trust.  An action to recover the deficiency balance remaining after a foreclosure sale need not be brought on the chancery side of the court and may properly be brought as an action at law.  A plaintiff’s action to recover on an assumed promissory note may be maintained as an action at law even though the plaintiff is not named in the deed of trust.

Real Estate: Foreclosing on Homeowner Association Liens to Secure an Interest in Real Estate

In recent editions of Creditor News we have been discussing the benefits of using real estate to improve creditors’ positions.  As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss.  In this edition, we will review the benefits of using homeowner association liens to aid in the collection of your debt.  Last month we reviewed the special procedures for the collection of homeowners association dues under Virginia Code §55-516.  We will now review the procedures for suits to foreclose on the lien.

Suits must be brought within thirty six months of filing, but after the perfection of the lien.  The Homeowner’s Association may sell the lot at a public sale, subject to prior liens.  There are detailed requirements in the code, a brief summary of which include the following:

1.  The association shall give notice to the lot owner prior to advertisement as required in the code.

2.  After expiration of the 60-day notice period, the association may appoint a trustee to conduct the sale.

3.  If the lot owner meets the conditions specified in this subdivision prior to the date of the foreclosure sale, the lot owner shall have the right to have enforcement of the perfected lien discontinued prior to the sale of the lot. Those conditions are that the lot owner: (i) satisfy the debt secured by lien that is the subject of the nonjudicial foreclosure sale and (ii) pays all expenses and costs incurred in perfecting and enforcing the lien, including but not limited to advertising costs and reasonable attorneys' fees.

4.  In addition to the advertisement requirements, the association shall give written notice of the time, date and place of any proposed sale in execution of the lien, and include certain information required in the code.

5.  The advertisement of sale by the association shall be in a newspaper having a general circulation in the city or county wherein the property to be sold, with certain information requirements as set forth in the code.

6.  Failure to comply with the requirements for advertisement contained in this section shall, upon petition, render a sale of the property voidable by the court.

7.  In the event of a sale, the code sets forth bidding and proceeds application procedures.

8.  After sale, the trustee shall deliver to the purchaser a trustee's deed conveying the lot with special warranty of title.

9.  After completion, the trustee shall file an accounting of the sale with the commissioner of accounts.

We have experienced attorneys and staff who can examine title, file homeowner association liens, and litigate to enforce the same.