Monday, December 25, 2017

Real Estate: The Virginia Property Owners' Association Act - Foreclosing on Memorandums of Lien

     In prior blogs, I discussed the provisions related to filing a memorandum of lien under the Virginia Property Owners’ Association Act.
     The Act provides: “At any time after perfecting the lien pursuant to this section, the property owners' association may sell the lot at public sale, subject to prior liens.” In order to conduct a nonjudicial foreclosure, the association must comply with the statutory requirements.  
     The association must give notice to the lot owner prior to advertising the sale. The notice must include notice of: “(i) the debt secured by the perfected lien; (ii) the action required to satisfy the debt secured by the perfected lien; (iii) the date, not less than 60 days from the date the notice is given to the lot owner, by which the debt secured by the lien must be satisfied; and (iv) that failure to satisfy the debt secured by the lien on or before the date specified in the notice may result in the sale of the lot.” The notice must also inform the lot owner of the right to bring a court action in the circuit court of the county or city where the lot is located to assert the nonexistence of a debt or any other defense of the lot owner to the sale.
     If the lot owner (i) satisfies 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, then the sale is discontinued. However, if after 60 days and the lot owner has not made those payments, the association may appoint a trustee for the sale and advertise the sale. In addition to advertising the sale, the association must give written notice of the time, date and place of any proposed sale in execution of the lien, and including the name, address and telephone number of the trustee. That notice must be at least given to the owner, lienholders and their assigns by certified or registered mail 14 days prior to the sale.
     The association must advertise the sale in a newspaper in the city or county where the property will be sold. The advertisement must be in a section with legal notices or where the property being sold is generally advertised for sale. The advertisement must describe the property by address and general location and have information for the representative or an attorney who can respond to inquiries about the property with their name, address, and telephone number. The advertisement must be in the newspaper for four successive weeks, but if the lot is located in a city or county immediately contiguous to a city, publication of the advertisement for five different days is sufficient. The sale then must be held on any day after the last advertisement but not earlier than 8 days after the first advertisement and not more than 30 days after the last advertisement. 
     Failure to comply with these and other requirements in the statute will render the sale of the property voidable by the court. The law firm of Lafayette, Ayers & Whitlock, PLC, represents homeowner’s associations and can handle memorandums of lien and foreclosure procedures.

Monday, December 18, 2017

Bankruptcy: IRA Accounts and Exemptions

     The United States Bankruptcy Court, in Smith v. Bryant, ruled that the debtor’s IRA funds were not excluded from the bankruptcy estate. In doing so, the Court examined and explained that there are significant differences between IRA's and ERISA-qualified retirement plans, the provision in Bankruptcy Code §541(c)(2) exempting qualified funds from the bankruptcy estate does not apply to the IRA funds in this case.
     In Smith the debtor, after her termination of employment from a bank, rolled over her interest in a stock and thrift plan at the bank into her own individual retirement account. The debtor argued that the IRA should have been excluded from her bankruptcy estate because the assets used to fund the IRA had been accumulated in an ERISA-qualified retirement plan.
     In reviewing the differences between ERISA-qualified retirement plans and IRAs, the Court noted that IRAs are subject to almost complete control by its owner and do not contain the same anti-assignation and non-alienation provisions required under ERISA-qualified plans. The Court stated that if the debtor had an interest in a trust that contained an anti-alienation provision that was created under Virginia law, such an interest would also be excluded from her bankruptcy estate under Bankruptcy Code §541(c)(2). Nevertheless, because the debtor created her IRA and had complete control over the funds in it, the funds were not exempt from the bankruptcy estate, and the debtor was ordered to turn the funds over to the trustee.
     The Court's ruling in Smith clarifies the issue regarding IRA accounts and exemptions, and with debtors frequently changing jobs, the issue is likely to resurface in many instances.

Monday, December 11, 2017

Collections: Post Judgment Collection - A Focus on Debtor's Interrogatories

     Once judgment is entered, what is next? Although all creditors would like for the judgment amount to "fall from the sky", it does not. Sometimes debtors will pay, either in full or in incremental payments. Sometimes creditors can garnish wages or accounts, or issue a levy on property. Sometimes creditors can bring a creditor's bill to sell real estate. But what can be done when the above listed remedies are not, or at least are not yet, options, or when there is no information about the debtor from which to devise a post judgment collection plan? Virginia Code §8.01-506 provides a good start - Debtor's Interrogatories. For the price of a summons to answer interrogatories (usually $44.00 plus service charges) an attorney can summon the debtor to appear before the court granting the judgment (or other court should the matter be transferred by the judgment court) or a Commissioner in Chancery (a lawyer appointed by the court to serve in this capacity) to examine the debtor's personal estate, specifically, to answer questions about income, assets and the debtor's general ability to pay in order to attempt to satisfy the judgment. The summons is enforceable by a capias (arrest warrant) which is issued through the court.
     The interrogatory procedure is summary in nature. No pleadings are required. No trial by jury is available. Under recent amendment to Virginia Code §8.01-506, the creditor may, as part of the interrogatory system, require the production of account books or other writings that contain evidence of the judgment debtor's estate, provided that the creditor gives an affidavit stating that he believes the books exist and identifies them with reasonable certainty.
     Virginia Code §8.01-506 allows a debtor to request that the interrogatories be held at a court most convenient for the debtor. Therefore, if the debtor moves far from the creditor's area, it may not be cost effective to pursue the interrogatories.
     It is important to note that a creditor cannot conduct debtor's interrogatories - only an attorney can. This certainly can be frustrating for creditors who take their own uncontested judgments and file their own garnishments, but it is a reminder as to why creditors are better served by turning all accounts over to counsel for collection prior to seeking judgments so that counsel can assess the attorney's fee provided in the contract or note, and can keep the entire process moving.

Monday, December 4, 2017

Creditors, Let's Talk about Foreclosures!

      Foreclosures. This is not a topic that most creditors wish to discuss. After all, if you get to this point your loan is delinquent and you are not having success getting your borrower to pay. When to take action and what action to take – these are important matters to discuss. We can help!
      At Lafayette, Ayers & Whitlock PLC we represent holders of deeds of trust and help our clients evaluate their order of priority and equity cushion, as well as explore bankruptcy implications and collection strategies. We do this for first, second and subsequent deeds of trust, as well as equity lines and judgment liens (the last of which can be enforced through a Creditor’s Bill).
      We do foreclosures all across the Commonwealth of Virginia.
      Even if we are not your specified trustee in your deed of trust, we can prepare and record a deed of appointment of substitute trustee and protect your interests.
      I invite you to please call me so that we can discuss your questions.

Monday, November 27, 2017

Creditors, Let’s Talk about Bankruptcy!

     Bankruptcy! This is not a topic that most creditors wish to discuss! However, with Judges still “reacting” to the economic downturn of the last few years, with bankruptcy filings on the rise, with the conversion of many Chapter 13 cases to Chapter 7, with the aggressive lawsuits filed by counsel for debtors for violations of consumer laws, with increasingly detrimental provisions in Chapter 13 plans, and, with the strict review of proofs of claim and the requirements for the same, we should talk!
     In regard to proofs of claim, our local bankruptcy courts require that if you are alleging a security interest in the debtor’s principal residence, in addition to the proof of claim form, you must also file a completed form B 10 (Attachment A) setting out the principal due, interest due, late fees, returned check fees, attorney’s fees, escrow shortage, amount due to bring loan current, etc. In addition, each time the debtor becomes delinquent on their mortgage during the bankruptcy, you must file form B 10 (Supplement 2), setting out late charges and other expenses charged to the debt. In the event the debtor’s mortgage payment amount changes due to increase or decrease in interest rate, insurance premiums or real estate taxes, form B Supplement (1) will need to be filed.
     Obviously, this is a more complex and detailed filing, and, certainly, will be closely scrutinized. While you can file your own proofs of claim, we can also do it for you.
     Creditors must be very careful to fully redact ALL “identifying data” (this includes procedure codes and/or other identifying treatment references for healthcare providers) on court filings to help protect debtors’ vital information from identity theft. Failure to do so will result in a court award of sanctions and attorney’s fees. Several local bankruptcy attorneys are reviewing all proofs of claim in their cases to spot possible violations. I have already had clients who have filed their own proofs of claim and been sued for violations. This is a very expensive problem.
     Accordingly, I am still offering a “flat rate” fee for filing your proofs of claim and ask that you consider taking advantage of the same. In the end, I think that this will be a less costly and better alternative for you. I will file your first proof of claim in a case for a charge of $250.00. Second and subsequent pleadings for the same case will be billed at one half hour, and one quarter hour respectively.
     I invite you to please call me so that we can discuss your questions.

Monday, November 20, 2017

LAW Real Estate Matters

     Many of you have recently asked if I handle real estate work. The answer is YES! I do residential and commercial transactions – especially for Credit Unions. I handle first and second loans, as well as refinances, equity lines of credit, and foreclosures. I have three very experienced real estate paralegals (Donna Edmondson, Dwen Jenkins, and Sandra Milburn), who have been working in the real estate field for many years.
     Unlike other attorneys and real estate settlement companies, I will always provide you with the real cost of your transaction in advance, not have “hidden costs” with different names buried in the settlement statement.
     I invite you to please call me so that we can discuss your real estate needs.

Monday, November 13, 2017

LAW Business work

     Many of you have inquired about my availability to do business work and attend corporate, credit union, and homeowner’s association meetings. I do this, and, I am available.
     When it comes to board work, I recognize that most board members are volunteers. Having experienced counsel available to provide advice, guidance and continuity as boards change is crucial for productive and efficient boards, as well as for avoiding potential board member liability in lawsuits.
     When it comes to larger meetings (stockholders, credit union members, or homeowner’s associations), having experienced counsel available to explain rights and options, as well as analyze courses of action and provide advice can be invaluable.
     If you think that you may have a need, please call me so that we can discuss. I can structure a reasonable rate to fit your needs.

Monday, November 6, 2017

Creditors, Let's Talk about Post Judgment Collections

      Post Judgment Collections. Frequently this is the time that you will collect most of your money.
     While at Lafayette, Ayers & Whitlock PLC we represent creditors from beginning to end in the collection process, we recognize that some creditors either still file some of their own suits, or, have done so in the past. After taking that judgment, and if collection does not come easy, all too frequently judgments are “put on the shelf” and eventually forgotten. Do not let this happen to you! At Lafayette, Ayers & Whitlock PLC we can help you collect judgments that you have already taken. Your General District Court judgments are good for ten years, but can be docketed in a Circuit Court to extend the life of the judgment to twenty years. These judgments can even be renewed for an additional twenty years. We can work your old judgments. We have the most up-to-date programs, resources and methods. We do all of this on a percentage of collections fee basis – in other words, if we do not collect, you do not pay us a fee. Accordingly, our incentive is to collect! I take pride in the fact that at Lafayette, Ayers & Whitlock PLC our experience, staff, responsiveness and resources have made our post judgment collections superior to other collectors.
     I invite you to please call me so that we can discuss your questions.

Monday, October 30, 2017

Foreclosure: Advertisements of Sale

     The Code of Virginia provides specific guidance as to advertisements for foreclosure sales. The sale must be properly advertised or it will be void upon order of the court.
     Virginia Code §55-59.2 states that if the deed of trust provides for the number of publications of the advertisements, no other or different advertisement shall be necessary, provided that: if the advertisement is inserted on a weekly basis, it shall be published not less than once a week for two weeks, and, if such advertisement is inserted on a daily basis, it shall be published not less than once a day for three days, which may be consecutive days. If the deed of trust provides for advertising on other than a weekly or daily basis, either of these statutory provisions must be complied with in addition to the provisions of the deed of trust. If the deed of trust does not provide for the number of publications for the advertisement, the trustee shall advertise once a week for four consecutive weeks; however, if the property, or a portion of the property, lies in a city or county immediately contiguous to a city, publication of the advertisement may appear five different days, which may be consecutive. In either case, the sale cannot be held on any day which is earlier than eight days following the first advertisement or more than thirty days following the last advertisement.
     Advertisements must be placed in the section of the newspaper where legal notices appear, or, where the type of property being sold is generally advertised for sale. The trustee must comply with any additional advertisements required by the deed of trust.
     Virginia Code §55-59.3 requires advertisements to describe the property to be sold at foreclosure; however, the description does not have to be as extensive as in the deed of trust – substantial compliance is sufficient so long as the rights of the parties are not affected in any material way. The statute does require the property to be described by street address, and, if none, the general location of the property with reference to streets, routes, or known landmarks. A tax map number may be used, but is not required.
     Virginia Code §55-59.2 requires the advertisement to state the time, place and terms of the sale. If the deed of trust provides for the sale to be conducted at a specific place, the trustee must comply with this term. If there is no mention in the deed of trust, §55-59(7) provides that the auction may take place at the premises, or, in front of the circuit court building, or, such other place in the city or county in which the property or the greater part of the property lies. In addition, the sale could be held within the city limits of a city surrounded by, or contiguous to, such county. If the land is annexed land, the sale could be held in the county of which the land was formerly a part.
     The statute provides that the advertisement shall give the name or names of the trustee or trustees. In addition to naming the trustee, the advertisement must give the name, address and telephone number of the person who may be contacted with inquiries about the sale. The contact person can be the trustee, the secured party, or his agent or attorney.

Monday, October 23, 2017

Real Estate: Using Deeds to Secure Your First, Second, Equity Line or Refinance Home Loans

     In prior blogs, we began a discussion of 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 securing your first, second, equity line or refinance home loans with a deed of trust.
     Real estate liens provide important security for your debt. Since real estate is the largest investment and asset for most individuals, they will usually make every effort to pay debts secured by their real estate first. However, you need to know the chain of title in order to make an informed decision about your loan.
     Specifically, in what position will your lien be? Are there any “clouds” on the title? You will not know the answer to these questions without a proper title search and review.
     Once you know your position you will need to examine the available equity to cover your loan. What is the value? What are the balances due on the liens ahead of your anticipated position? Beyond the business decision of determining when the equity is sufficient for your risk tolerance, in order to take advantage of the “$1.00 rule” in the bankruptcy code for Chapter 13 cases (should your debtor decide to later file bankruptcy), you need to ensure that there is at least $1.00 in equity to cover the loan. You should take into consideration that property values may go down (e.g., 2008 to present).
     If the deal is made and the real estate closing occurs, immediate and proper recording of your deed of trust is essential to preserve your position. If the debtor defaults, foreclosure on the property can occur. If the debtor seeks reorganization of his debt in Chapter 13, you can seek full payment of the debt.
     We have experienced attorneys and staff who can examine title and properly represent your interests in real estate closings.

Monday, October 16, 2017

Bankruptcy: Debtors Retaining Collateral

     The Fourth Circuit Court of Appeals case of Home Owners Funding v. Belanger stands for the proposition that Chapter 7 bankruptcy debtors may retain their collateral after discharge if they are current in their consumer loan installment payments.
     In Belanger the debtors, who had remained current on their payments, filed for Chapter 7 relief and filed a statement of intent under Bankruptcy Code §521 (2) (a) indicating that they wanted to retain possession of their mobile home. The creditor moved the Bankruptcy Court to compel the debtors to reaffirm the debt, redeem the collateral, or surrender it. The creditor, relying on Bankruptcy Code §522 (2) (a), was obviously concerned that the collateral would depreciate to a value less than the balance due, and would be barred from recovering the deficiency. The Court noted that the creditor is presumed to have structured the risk of depreciation into its loan.
     The Court noted that it has held (in the case of Riggs National Bank v. Perry) that a "default-on-filing clause" in an installment loan contract was unenforceable as a matter of law. Therefore, the creditor could not ask for the collateral merely based on the filing. Note, however, that not all courts take this position; see Dominion Bank v. Koons.
     The Court in Belanger denied the creditor's motion and discharged the debtors, holding that the debtor's had complied with Bankruptcy Code §521 (2) (a) by giving notice of their intent to retain the property while continuing to make payments in accordance with their contract with the creditor.
     Attorneys representing debtors can use this opinion against creditors by urging them to remain current with their loans, but not to sign reaffirmation agreements. Many of you have already run into this problem with debtor's counsel.

Monday, October 9, 2017

Collections: Perfection of Vehicle Liens

     In almost all circumstances, courts will recognize a lien as being valid only when it has been "perfected". Perfected means registered with the appropriate governmental agency - DMV, Board of Inland Game and Fisheries, etc.; language on a promissory note that the loan is secured by the vehicle is not enough. Although the result of failed perfection could be harsh (a lost lien), it makes sense; without a registration, no one could ever know who has liens. Understanding this, it is important to have someone in your creditor organization be designated to follow-up on lien perfection to ensure that it is done, to ensure that it is done promptly, and to ensure that it is done right.
     What happens when your debtor moves to another state? As long as the creditor holds the original certificate of title reflecting the lien, the creditor will usually be protected. If the vehicle is taken to another state but is never re-registered or re-titled, the original secured creditor who is listed as lienholder on the original certificate of title maintains its perfection. The original secured creditor also maintains its lien if the debtor moves and obtains a new certificate of title with the creditor's name on it. However, what happens if the debtor moves, obtains a new certificate without the lien recorded? There could be a problem. To avoid the possible problem, follow up on your transient debtors like you do your new liens.

Monday, October 2, 2017

Foreclosure: Deed in Lieu of Foreclosure

     In certain cases it may be more practical for the lender to seek or accept from the borrower a deed in lieu of foreclosure rather than incur the expense of foreclosure – this is at the lender’s discretion. If the lender agrees, in return for voluntarily surrendering the property, the borrower will seek either partial or complete satisfaction of the debt.
     Considerations. Before accepting the deed in lieu of foreclosure, the lender must consider many matters:
· Value of the property vs. the amount of the debt.
· Other debts on the property. A deed in lieu of foreclosure does not extinguish prior or junior liens or encumbrances. Thus the lender, in accepting the deed, accepts the property with the liens. It is possible for the lender to structure the deed in lieu of foreclosure so that it does not release the deed of trust so as to preserve a future foreclosure to extinguish subordinate liens.

Monday, September 25, 2017

Real Estate: Homeowner Associations - Easements

     Cases involving HOA powers are frequently fact specific and governing document specific. Recently, the Frederick County Circuit Court decided a case in which a homeowners association was held in violation of the homeowners association’s restrictive covenants and liable for compensatory damages and attorneys’ fees because it removed a wall on a homeowner’s property. The homeowner spent a considerable amount of time and effort improving a portion of a shared roadway that was on his property. He cleared the land, widened the pathway, and built an eight foot retention wall along the pathway. The HOA notified the homeowner that the wall was encroaching on the right of way and told the homeowner that it must be removed at the homeowner’s expense. There was no board of directors hearing or meeting before the decision was made. Without further notice, the wall was removed but the homeowner refused to pay. In addition to tearing down the wall, the HOA installed drainage culverts in the right of way which resulted in silt flowing into the property’s septic system. The HOA filed suit and obtained a General District Court judgment for the expense of removing the wall. The homeowner then appealed the judgment to the Frederick County Circuit Court and filed a complaint against the HOA. The homeowner claimed that the HOA acted outside its authority under the restrictive covenants, which constituted trespass. The HOA filed a counterclaim, alleging breach of contract and violation of the Property Owners’ Association Act (Va. Code Section 55-508). The court held in favor of the homeowner and found that the HOA exceeded its authority under the restrictive covenants. The HOA did not have authority to remove the wall or to install the drainage culverts. In addition, the HOA did not have the ability to charge the homeowner for either the removal of the wall or the installment of the drainage culverts. The court awarded the homeowner compensatory damages of $28,500 (the value of the wall and cost of returning the property to its prior condition) and attorneys’ fees of $48,844.  
     It is important to ensure that HOA covenants provide for the powers necessary to take self-help to effect repairs and remove violations. It is also important for HOAs to work through the proper channels and act within its authority granted by restrictive covenants. Failing to do so can be costly for an HOA. The law firm of Lafayette, Ayers & Whitlock, PLC has experience in drafting, reviewing, and amending HOA documents, as well as, representing HOAs in court.

Monday, September 18, 2017

Bankruptcy: IRA Funds are not disposable income in Chapter 13

       The case of Solomon v. Cosby, decided by the United States District Court in Baltimore, Maryland, served as a good review (although bad outcome) of how Individual Retirement Account funds are treated in a Chapter 13 bankruptcy.
     The Appeals Court reversed the Bankruptcy Court's decision that IRA funds are disposable income, and that the debtor's Chapter 13 plan should be rejected as not paying "all of the debtor's projected disposable income".
     In Solomon, the debtor, a retired physician, had proposed a Chapter 13 plan excluding approximately $1.4 million invested in an IRA. The debtor was facing tort claims of sexual misconduct from several former medical patients who sought damages of $160 million at the time he filed his Chapter 13. The plan provided for only $45,000.00 over five years.
     The Appeals Court held that under the clear terms of Bankruptcy Code §1325(b)(2), the debtor's IRA funds are not "income". Both the statutory definition of "disposable income" as income that is received by the debtor, as well as the requirement that projected income must be calculated over the life of the plan, contemplate income that a debtor is actually receiving at the time of the confirmation hearing, the debtor was not actually receiving any disbursements from his IRAs. The debtor also insisted that he had no intentions of withdrawing funds from the IRAs during the life of the plan.

Monday, September 11, 2017

Collections: Bad Check Collection and the Fair Debt Practices Collection Act

     Those who actively engage in the collection of debts as a third party are cognizant of the fact that the Fair Debt Collection Practices Act (FDCPA) applies to their collection activities. However, does the FDCPA apply to notices given as a prerequisite to criminal prosecution for passing bad checks? The United States District Court at Charlottesville, Virginia, in the case of Shifflett v. Accelerated Recovery, examined the issue but did not give a definitive answer.
     Virginia Code §18.2-183 states that letters are required to be mailed to debtors to establish a prima facie case of fraud or knowledge of insufficient funds in order to pursue criminal prosecution. The creditor/defendant in Shifflett argued that it had never sought recovery through the civil process, it had always pursued a criminal warrant in cases where it was unable to collect an unpaid check.
     The debtors/plaintiffs, on the other hand, argued that the creditor was required to give notices pursuant to the FDCPA. The essence of the debtors' argument was that the notices sent by the creditor, regardless of the creditor's practice or intent, constituted a "communication" pursuant to the language of FDCPA §1692(a) and therefore trigger the notice requirements of FDCPA §1692(a).
     The Court did not rule as to whether the FDCPA applies to notices pursuant to Virginia Code §18.2-183. Instead, the Court focused on distinctions between the creditor's letters in Shifflett and that which is required by Virginia Code §18.2-183 for criminal prosecution. The Court found that the creditor's letters did not evidence the creditor's intent to pursue criminal remedies as opposed to civil remedies. The creditor claimed that the language of its letters referring to "the legal process" indicated its intent to use the criminal legal processing not the civil legal process. The Court, however, stated that it was unable to discern precisely in what manner the phrase "legal process" objectively discriminates between the criminal legal process and the civil legal process.
     The Court also noted that the creditor's letters also advised the debtors that payment must be made within ten days from the date of the letter. Virginia Code §18.2-183 provides that notice mailed by certified mail or registered mail with evidence of returned receipt shall be deemed sufficient and equivalent to notice having been received by the maker or drawer. The creditor did not present evidence that it sent the letters by either certified or registered mail with the request of a returned receipt.
     The Court also noted that the creditor's letters stated explicitly that it is "attempting to collect a debt..." By contrast, the Court stated that it could not locate any language within the letters by which even vaguely suggest that the creditor had sent the notices in furtherance of pursuing a criminal proceeding.
     Accordingly, the Court found that the creditor failed to demonstrate that the letters were sent to the debtors pursuant to the requirements of Virginia Code §18.2-183, and therefore, found the creditor liable for its failure to comply with the notice requirements of §1692(a) of the FDCPA.
     The lesson from Shifflett - when contemplating pursuing legal measures for “bad checks” it is important to use counsel with experience in both criminal and civil law.

Monday, September 4, 2017

Foreclosure: Sale Price and Delays in Sale

       The trustee is under a duty to “use all reasonable diligence to obtain the best price.” 
     If the trustee determines that in order to fulfill his fiduciary duty to realize the highest price for the property, a recess is necessary, he or she should recess the sale. Arguably, the recess is within the scope of the discretion afforded trustees in the conduct of the foreclosure sale. For example, if a bidder who previously advised the trustee of his interest in bidding on the property is delayed, the trustee, in his discretion, may recess the sale to a later hour on the same day to allow the bidder to attend the sale. If the trustee fails to accommodate the bidder and the property is sold for a price less than the bidder was willing to pay, the trustee may have breached his duty to “use all reasonable diligence to obtain the best price.” A decision by the trustee to recess the sale, however, should not impair the sale by making it impossible or impracticable for the bidders to appear and bid at the recessed sale.
     The postponement of a foreclosure sale to a different day is not a recess and is governed by statute. Virginia Code §55-59.1(D) provides that the trustee, in his discretion, may postpone the sale to a different day, and no new or additional “notice” must be given. Presumably, the “notice” referred to in this section is notice of the postponement. The trustee needs only to announce at the sale that it has been postponed. §55-59.2(D) provides that if the sale is postponed, the trustee must advertise the “new” sale in the same manner as the original advertisement. Read in conjunction, these sections require the trustee who postpones the foreclosure to re-advertise the sale in the same manner as the original sale was advertised. Although the secured obligation will not need to be accelerated again, all other aspects of the foreclosure must be completed. Effectively, a postponed sale is a new sale in which the trustee must complete all acts that he or she completed in the first sale.

Monday, August 28, 2017

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:
· Did the defendant make the following statements?
· Were they about the plaintiff?
· Were they heard by someone other than the plaintiff?
· Are the statements false?
· 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?
· 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.

Monday, August 21, 2017

Bankruptcy: Vehicle Repossessions/Automatic Stay

     The United States District Court of Abingdon, Virginia, in the case of Nationsbank N.A. v. Bush reversed a Bankruptcy Court decision finding that the creditor bank had violated the Bankruptcy Code's automatic stay against actions by creditor's against bankrupt debtors.
     The District Court found that in order for the bank to have violated the automatic stay, the bank must have known of the debtor's filing. The District Court found that the notice of filing was mailed to the proper address and was not subsequently returned undelivered may support the conclusion that the bank received notice, it does not support the conclusion that the bank received the notice before the sale date. The issue was not whether the bank ever received notice, but when the bank received the notice. The District Court found that there was no evidence from which the Bankruptcy Court could have found that the bank received the notice before the sale.
     Despite the favorable ruling, creditors should be very careful to establish a checking system so that violations will not occur. The penalty for violations range from jail time to fines and attorney's fees.


Monday, August 14, 2017

Collections: Construction Case Garnishments

     The United States District Court in Alexandria has reviewed a matter important to many supplier and contractor creditors: the garnishment of funds due their debtors from another party. The case was U.S. v. Harkins Builders Inc. In Harkins a material supplier was pursuing a garnishment proceeding against a builder who owed money to the judgment debtor, a drywall subcontractor. The Court ruled that the supplier was not bound by a mandatory arbitration clause in a separate contract between the builder and the drywall sub.
     In Harkins a materials company supplied drywall materials to drywall subcontractors. When the drywall subs failed to pay for the materials, the supplier obtained a federal court judgment for $278,520. The supplier then initiated a garnishment proceeding against a builder to attach monies owed by the builder to the drywall sub under a contract between them. As garnishee, the sub confessed assets but argued that the amount it owed to the drywall sub should be reduced by setoffs totaling $50,853 allegedly owed by the sub to the builder under their contract. The garnishee also argued that any dispute about these setoffs must be resolved through arbitration, as provided in the contract between the drywall sub and the builder.
     The Court rejected the contention that the resolution of the amount of money owed by the builder to the drywall sub and subjected to garnishment must be accomplished through arbitration. As a judgment creditor of the drywall sub, the supplier was not a party to the contract between the sub and the builder, and its interest was limited to the drywall sub's property interest in the builder's hands. The parties to the drywall builder contract agreed to arbitration as an efficient procedural mechanism for resolving contractual disputes, including disputes over amounts owed. The agreement to arbitrate, however, does not add or subtract value in the calculus for determining the value of the contract right. The Court ruled that since the judgment creditor was afforded court procedures for determining the value, the fact that the property before the court was created by a contract containing an arbitration clause did not require a non-party to the contract to follow the contract's procedural mechanisms for dispute resolution. Accordingly, the federal courts assumed jurisdiction to make the decision.

Monday, August 7, 2017

Foreclosure: Notice of Sale

     The Code of Virginia provides specific guidance as to giving notice of a foreclosure sale.
     §55-59.1 requires that the written notice of sale contain the time, date and place of the proposed sale, as well as either (i) the instrument number, or, deed book and page number, of the instrument of appointment filed pursuant to §55-59-59 (appointment of substitute trustee), or, (ii) a copy of the executed and notarized appointment of substitute trustee. Personal delivery or mailing a copy of the advertisement by certified or registered mail is sufficient.
     §55-59.1 requires the trustee to send written notice of the time, date and place of the sale to (i) the present owner of the property … (ii) any subordinate lienholder … (iii) any assignee of such note … (iv) any condominium unit owner’s association that has filed a lien … (v) any property owner’s association that has filed a lien … (vi) any proprietary lessees’ association that has filed a lien.
     It is important to know that in addition to the notice required by statute, the note or the deed of trust may contain additional notice requirements. Accordingly, the trustee should examine both of these documents.
     §55-59 provides that the notice can be sent by either the trustee or the lender.

Monday, July 31, 2017

Real Estate: Statute of Limitations Enforced on Challenge to Bylaws Amendment

     The Virginia Condominium Act, specifically Virginia Code Section 55-79.71(C), provides for a statute of limitations in regard to challenging amendments to governing documents. The section provides, in part:
     “An action to challenge the validity of an amendment adopted by the unit owners’ association pursuant to this section may not be brought more than one year after the amendment is recorded.”
     In the case of Godwin v. Bay Point Association Board of Directors, a Norfolk Circuit Court was faced with a homeowner challenge to bylaw amendments. The homeowner, Godwin, had sued the association alleging that it breached its governing documents by taking actions four years earlier and three years earlier that increased her assessment for insurance premiums. The association filed a motion to dismiss Godwin’s complaint on the ground that it was time-barred pursuant to Virginia Code Section 55-79.71(C).
     Four years earlier the association’s board of directors signed a resolution regarding physical damage and flood insurance. Three years earlier it drafted and signed a bylaw amendment relating to insurance premiums. The association argued that challenging either of these actions was time-barred under the statute of limitations.
     The court ruled that the resolution was not an amendment to the condominium governing documents within the meaning of the act. The court found that, at most, the resolution represented a statement of the board’s opinion that the bylaws should be amended to revise the way insurance premiums were assessed against the unit owners. In the resolution, the board acknowledged the need to amend the bylaws and stated that the amendment process was lengthy and inconsistent with the budget preparation schedule for the upcoming fiscal year. Because the resolution was not an amendment adopted by the unit owners pursuant to the act, the court found that the act’s statute of limitations did not apply. However, the court ruled that the bylaws amendment was an amendment to the governing documents within the definition contemplated by the act. Accordingly, the one-year statute of limitations applied.
     Godwin argued that because the association violated mandatory procedures for amending the bylaws, the amendment was null and void, and thus, the statute of limitations did not apply. The court, however, in examining the statute, noted that nothing in the statute suggested that only valid bylaw amendments are subject to the one-year statute of limitations. The court noted that any amendment, not just valid ones, may be challenged within one year. Accordingly, Godwin’s claim was barred by the statute of limitations.
     Godwin then tried to argue that there was a breach of fiduciary duty (the legal duty of the board to act in the best interests of the residents). Godwin and the association agreed that an action for such breach must be filed within two years from the date of breach. Godwin argued that, although the association initially breached its fiduciary duty four and three years earlier “when in bad faith it knowingly and willfully” adopted the resolution and the bylaws amendment, there were renewed breaches when the annual budgets were adopted in the last two years, which reflected the change made to assessments for insurance premiums. The court disagreed, finding that any breach of fiduciary duty relating to the change in the insurance premium assessment took place when the association acted four and three years ago to adopt the resolution and bylaw amendment. The latest of these actions occurred over two years prior to Godwin’s filing suit. Therefore, the claim was time-barred.


Monday, July 24, 2017

Bankruptcy: Voluntary Conveyance - Debtor's Inheritance

     In the case of Shaia v. Meyer, the United States Bankruptcy Court, Eastern District of Virginia, Richmond Division, Judge Tice ruled that a bankruptcy trustee may recover funds a debtor inherited from his father and used to pay off two mortgages on property the debtor owned with his wife in a tenancy by the entirety. Essentially, the Court ruled that the debtor's payments constituted a voluntary or fraudulent conveyance that could be recovered by the bankruptcy estate.

Monday, July 17, 2017

Collections: Equal Opportunity Credit Act - Continued

       In a previous blog we began a review of The Equal Opportunity Credit Act.
     There are also many potential defenses that have been raised by lenders; listed below are those which have been cited most frequently.
     1. Voluntary signatures are okay. Although a spouse cannot be required to co-sign a note, voluntary signatures are okay. Thus, the lender can win if it can show that the spouse's signature was voluntary.
     2. One spouse was not enough. A lender can argue that the applicant's spouse did not satisfy it's credit criteria all alone, and the other spouse's assets figured into his loan decision, which is why the other spouse's signature was required.
     3. Both spouses are principals. If both spouses are principals in a business, the lender can argue that it required both of their signatures because of their business relationship rather than their marital status.
     4. Pre-1986 guarantors. ECOA regulations were expanded to include guarantors as of October 1, 1986. Courts have been split as to whether they apply to guarantors if a bank violated the Act before that date but renewed the note after it.
     5. Good Faith. A lender is not liable if it acted in good faith compliance with the Federal Reserve Board's "official staff interpretation" of the ECOA, which can be found at 12 C.F.R. §202.
     The City of Richmond Circuit Court denied an ECOA defense pled by a wife who had signed a broad release when the loan was refinanced. The case was Richmond Lotco L.P. v. Perrowville Dev. Corp.
     In Perrowville the lender obtained a guaranty and general release of claims from four directors of a real estate development company and their wives. The release was included in the modification of an existing loan that the lender had purchased from the Resolution Trust Corp. after the original lender, a bank, went into receivership. The release stated that the borrowers and guarantors would release the note holders "from any and all claims, losses, liabilities, causes of action of any king whatsoever, if any, whether existing or contingent, known or unknown, matured or unmatured, that the borrowers or guarantors may now have or have had in whatever capacity against the noteholder...".
     When the successor lender brought a collection suit under the modification, the wives claimed that they were not involved in the business and that their guaranties had been required solely as a result of their marital status, in violation of the ECOA. The wives argued that the ECOA gave them both a defense to the collection action and a counterclaim against the lender. The lender argued that the release was part of the consideration that the lender received for continuing to finance the development project under the modification. The Court ruled in favor of the lender, stating that the modification agreement did not constitute a violation of the ECOA and that therefore the wives could not pursue either a defense or a counterclaim.
     The litigation that has arisen gives good cause to review lending policies for ECOA compliance. Please call me at 545-6250 if you have any questions. Eddie.

Monday, July 10, 2017

Foreclosure: Right to Cure a Default

     Question: Once a borrower is in default, can he “reinstate the loan”, or, “cure the default” and stop the foreclosure sale? 
     Answer: Yes. In general, most deeds of trust contain language that allows a borrower the opportunity to reinstate, or cure, the loan after the due date set out in the note. If the deed of trust contains this language, the note cannot be placed into default and accelerated until the cure period has expired. Government loans such as Fannie Mae and Freddie Mac have very specific requirements. In fact, a borrower can always cure a monetary default and stop a foreclosure up to the time of sale by paying in full, in good funds, the deficient amount, including all costs of the sale.

Monday, July 3, 2017

Real Estate: Using Real Estate to Secure Your Debt

     Many fail to recognize the benefit of using real estate to improve their position as creditors. Properly securing debts through real estate could make the difference between collecting the funds and incurring a loss.
     Securing debt with real estate can occur in several ways: deeds of trust, judgment liens, homeowner association liens, mechanic’s liens and lis pendens in litigation cases, just to name a few. In the upcoming blogs we will explore these, as well as the ways that I can assist you.
     We have experienced attorneys and staff who can examine title, do real estate closings, seek judgment and docket and enforce the same, and prepare and enforce statutory liens, such as those for litigation, homeowner’s associations and mechanic lien situations.

Monday, June 26, 2017

Bankruptcy: Dischargeability - False Oath

     In the case of Federal Deposit Insurance Corp. v. McFarland, the United States Bankruptcy Court, sitting in Arlington, Virginia, Judge Tice, denied the debtor, a real estate developer, a discharge in bankruptcy because of false testimony.
     The creditor had brought a complaint objecting to dischargeability because of allegedly false testimony given by the debtor in examinations under oath after the filing of the debtor's bankruptcy petition.
     The Court found as fact that the debtor gave false testimony under oath 1) that he did not receive from a closely held corporation any proceeds of a $440.00 certificate of deposit, when in fact he and his co-shareholder each received $220,000 and 2) that he had no bank accounts in nor made any deposits to offshore banks, when in fact he drew checks in amounts in excess of $300,000 payable to a Cayman Island bank.
     Although the debtor denied that he had any fraudulent intent when he testified, the Court found it "highly implausible" that the debtor forgot about the withdrawal of the $220,000. The debtor also failed to produce any credible evidence refuting the natural presumption that some $300,000 worth of checks admittedly drawn by debtor payable to an offshore bank were transfers of funds to the bank or to an account in the bank.
     Accordingly, Judge Tice found the evidence sufficient to warrant denial of the debtor's discharge.

Monday, June 19, 2017

Collections: Collections: Equal Opportunity Credit Act

     In this and on a future blog we will begin a review of The Equal Opportunity Credit Act. Over the last few years debtors have been utilizing the Equal Opportunity Credit Act, 15 U.S.C. §1691 ("the ECOA" or "the Act"), to avoid adverse action against them on seemingly valid creditor suits. The litigation that has arisen gives good cause to review lending policies for ECOA compliance.
     The ECOA was enacted in 1974 to prohibit discrimination by lenders on the basis of race, color, national origin, sex, marital status, age, religion and welfare status. The statute was originally aimed at discrimination against married women who were often denied credit unless they could get their husband's signatures. The statute, in many respects, has been taken to many illogical extremes.
     Lenders who violate the statute can be sued for actual damages, punitive damages up to $10,000, and costs and attorney's fees. Punitive damages can be awarded even if there are no actual damages, and even if the lender did not have a specific intention to discriminate. In practice, this means that the Act could be used in a counterclaim, not just a defense. In regard to a counterclaim, there is a two year statute of limitations for suits under the Act, which will usually have passed by the time a legal action by the creditor has begun. Most courts have ruled that the two year statute of limitations does not apply when the Act is raised as a defense.
     There are many potential issues that have been raised under the Act; listed below are those which have been cited most frequently.
     1. Requiring the signature of a spouse. Under federal regulations, "[A] creditor shall not require the signature of an applicant's spouse ... on any credit instrument if the applicant qualifies under the creditor's standards of creditworthiness for the amount and terms of the credit requested."(12 C.F.R. §202.7(d)(1).). There have been many cases litigated regarding this. The Virginia Supreme Court found that a bank violated the Act when a husband sought a loan for his construction company and the bank required his wife's signature as a guarantor, even though the husband was individually creditworthy, the wife had no interest in the company and was not a joint applicant, and the bank made no inquiry into her credit standing. The Court made these factual findings, but the company, ultimately, did not have assets to cover the debt. When the husband's construction company defaulted on the loan, after the husband died, the bank sought recovery from the wife and the husband's estate. When the Court found that this violated the Act, it ruled that there could be no recovery against the wife, as "Contracts executed in violation of law cannot be enforced....To deny [the wife] the right to use the ECOA violation defensively would be to enforce conduct that is forbidden by the Act." Debtor's attorneys are using this defense in foreclosure proceedings to prevent summary judgment on the foreclosure, stall for time, release a spouse from liability, and force the lender to defend against a complex and expensive federal claim.
     2. Asking for information about a spouse or former spouse, unless the applicant is relying on the spouse's income or lives in a community property state (Virginia is not - it is a Common Law state).
     3. Asking for sources of an applicant's income without saying that the applicant does not have to mention alimony or child support unless he or she wants the lender to consider it when it decides whether to extend credit.
     4. Taking race, sex or national origin into account when making a credit decision (although a bank can consider immigration status).
     5. Using statistics to judge the reliability of income from alimony, child support, pensions or welfare. Even if child support payments are statistically unreliable, a bank must consider whether the individual applicant has consistently received payments in the past.
     6. Ascribing a negative value to an applicant's age unless it relates to a "pertinent element of creditworthiness," such as the length of time the applicant has until retirement or the adequacy of security where a mortgage term exceeds the applicant's life expectancy.
     7. Requiring certain types of life insurance before issuing a loan.
     8. Basing a credit decision on the area in which the applicant lives, such as the fact that a white applicant lived in a largely black area.
     9. Changing the terms of a credit account without notifying the borrower within 30 days and including a boiler plate notice concerning the borrower's rights under the ECOA.
     10. Asking about an applicant's intentions to have children.
     11. Asking for the applicant's title (Mr., Mrs., Ms., etc.) without stating that providing this information is optional.
     Next month we will discuss potential defenses that have been raised by lenders.

Monday, June 12, 2017

Foreclosure: Foreclosure Sale Accounting

     The Code of Virginia requires that the trustee’s accounting be filed with the appropriate Commissioner of Accounts “within six months after the date of a sale.” The Manual for Commissioners of Accounts states that “although the Commissioner does not have specific statutory authority to extend the six month filing date, some courts allow the Commissioner to extend the deadline for good cause shown in advance of the filing date.” 

Monday, June 5, 2017

Real Estate: Suit to Enforce Mechanic's Liens

     In prior blogs we have been discussing the benefits of using real estate to improve creditors’ positions. In a previous blog we discussed perfection of liens.  In this blog we will discuss suit to enforce mechanic’s liens.
     Virginia Code §43-17 provides that no suit to enforce a mechanic’s lien can be brought:
     “…after six months from the time when the memorandum of lien was recorded or after sixty days from the time the building, structure or railroad was completed or the work thereon otherwise terminated, whichever time shall last occur; provided, however, that the filing of a petition to enforce any such lien in any suit wherein such petition may be properly filed shall be regarded as the institution of a suit under this section; and, provided further, that nothing herein shall extend the time within which such lien may be perfected.”
     Virginia Code §43-17.1 provides that:
     “Any party, having an interest in real property against which a lien has been filed, may, upon a showing of good cause, petition the court of equity having jurisdiction wherein the building, structure, other property, or railroad is located to hold a hearing to determine the validity of any perfected lien on the property. After reasonable notice to the lien claimant and any party to whom the benefit of the lien would inure and who has given notice as provided in § 43-18 of the Code of Virginia, the court shall hold a hearing and determine the validity of the lien. If the court finds that the lien is invalid, it shall forthwith order that the memorandum or notice of lien be released from record.”
     Virginia Code §43-18 provides:
     “The perfected lien of a general contractor on any building or structure shall inure to the benefit of any subcontractor, and of any person performing labor or furnishing materials to a subcontractor who has not perfected a lien on such building or structure, provided such subcontractor, or person performing labor or furnishing materials shall give written notice of his claim against the general contractor, or subcontractor, as the case may be, to the owner or his agent before the amount of such lien is actually paid off or discharged.”
     We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same.

Monday, May 29, 2017

Bankruptcy: Chapter 13 Plan Confirmation - Valuation of a Car

     Two bankruptcy cases help clarify the value that Bankruptcy Courts should place upon a vehicle when considering a Chapter 13 plan confirmation.
     In the case of In Re Mays, the United States Bankruptcy Court, Western District of Virginia, refused to confirm a plan which did not value a Ford pickup, which the debtors proposed to keep, at the truck's retail value as reflected in the NADA Used Car Guide. The Court found that Bankruptcy Code §325(a)(5) provides that if a debtor in Chapter 13 intends to retain property subject to a lien, then the secured creditor must receive the present value of its allowed secured claim. The Court further found that the retail price, as opposed to the acceptable wholesale price, was the most commercially reasonable price.
     In the case of In Re Dews, the United States Bankruptcy Court, Eastern District of Virginia, reached a similar conclusion that retail value is the appropriate value. In doing so, the Court recognized that this valuation was a change to the standard set forth in the case of In Re Jones, which held that the open market between private parties was the appropriate reference point to establish value. The standard was worked out in practice to generally mean somewhere around the average of the wholesale and retail values.
     The lesson of these two cases is that Chapter 13 plans should be reviewed to ensure that value is properly assessed. The end result will be, of course, a higher return on creditor claims.

Monday, May 22, 2017

Collections: Liability for Charges above the Credit Limit - Continued

     In a previous blog, we looked at two fact patterns involving situations where a customer makes retail purchases for products in an amount greater than the customer’s established credit limit – specifically, if the customer later fails to pay for the product, can he be successfully sued for payment. In those situations, we found that a court will likely hold a customer liable for charges that exceed the originally agreed upon credit limit. The credit terms require the customer to pay any and all sums that become payable because of the express terms of the contract and the intentions of the contracting parties. The next two fact patterns present new issues.
      Fact Pattern Three: When the retail account was originally opened, the credit limit (stated in a letter to the customer) was set at $4,000. The credit terms in the credit application state the applicant agrees "to pay any and all sums that may become payable under this account". Despite the credit limit, customer sends one of his employees to retailer to make a purchase, with customer knowing what the cost of the purchase will be. Retailer allows the purchase over the $4,000 limit. Later customer fails to make full payment. Retailer sues customer for the amount owed, let us say that it is $6,000. Customer raises the defense that charges above the credit limit should not have been allowed. In what amount should the retailer be able to judgment against the customer?
      In addition to the contract issue discussed in the previous patterns, this fact pattern presents an agency law issue. The Circuit Court of the City of Richmond dealt with a similar issue in Chevy Chase Savings Bank v. Strong. In this case, the bank issued a credit card. A card user then incurred charges on the credit card but the card user was the card owner’s husband. The court held that the wife was liable for the charges because she gave her husband authority to use the card. The husband was an agent, and was therefore only liable if the wife was able to prove that her husband exceeded his authority or that he agreed to become personally liable.
      In this fact pattern, the customer has given his employee authority to act on his behalf so the employee is his agent and the customer is the principal. As principal, the customer is liable for all charges. The credit was given to the customer, so he is liable for the charges, unless he is able to prove that the employee exceeded his authority or agree to become personally liable. In this case, the employee did not act outside of his authority and did not agree to become personally liable, so the customer will be liable for a balance incurred.
      Fact Pattern Four: When the retail account was originally opened, the credit limit (stated in a letter to the customer) was set at $4,000. The credit terms in the credit application state the applicant agrees "to pay any and all sums that may become payable under this account". Despite the credit limit, one of customer’s employees goes to retailer to make a purchase, without customer knowing what the cost of the purchase will be. Retailer allows the purchase over the $4,000 limit. Later customer fails to make full payment. Retailer sues customer for the amount owed, let us say that it is $6,000. Customer raises the defense that charges above the credit limit should not have been allowed. In what amount should the retailer be able to judgment against the customer?
      Although there was not express authority to spend a specific amount like the previous situation, the same rule applies. The employee acted as an agent for the customer. The customer is liable for the debt unless the customer is able to prove that the employee acted outside the authority given.
     However, similar to Chevy Chase Savings Bank v. Strong¸ evidence that the customer did not specify an amount to spend is not likely to be sufficient evidence to prove that the agent acted beyond to scope of authority given.

Monday, May 15, 2017

Foreclosure: Default

     Question: When is a loan in default? Answer: Under one or more of several circumstances. The most common way that a borrower is in default is monetary – e.g., the borrower fails to make a required payment. However, default can be for a non-monetary reason as well, such as:
1. Failure to pay taxes.
2. Failure to pay insurance.
3. Failure to remove or bond over mechanic’s liens.
4. Failure to perform requirements unique to the loan.
     If you have questions about default, please call Eddie at 545-6251.

Monday, May 8, 2017

Real Estate: Making Owners and General Contractors Personally Liable to Subcontractor, Laborer or Materialman

     Virginia Code §43-11 provides a way for owners or general contractors to be made personally liable to subcontractor, laborer or materialman if notice is appropriately given, and if the payer makes payment to the owing party without paying the notifying creditor. Specifically, §43-11 (2) states that:
     “…if such subcontractor, or person furnishing labor or material shall at any time after the work is done or material furnished by him and before the expiration of thirty days from the time such building or structure is completed or the work thereon otherwise terminated furnish the owner thereof or his agent and also the general contractor, or the general contractor alone in case he is the only one notified, with a second notice stating a correct account, verified by affidavit, of his actual claim against the general contractor or subcontractor, for work done or materials furnished and of the amount due, then the owner, or the general contractor, if he alone was notified, shall be personally liable to the claimant for the actual amount due to the subcontractor or persons furnishing labor or material by the general contractor or subcontractor, provided the same does not exceed the sum in which the owner is indebted to the general contractor at the time the second notice is given or may thereafter become indebted by virtue of his contract with the general contractor, or in case the general contractor alone is notified the sum in which he is indebted to the subcontractor at the time the second notice is given or may thereafter become indebted by virtue of his contract with the general contractor. But the amount which a person supplying labor or material to a subcontractor can claim shall not exceed the amount for which such subcontractor could file his claim.”
     The notices referred to in this code section are commonly referred to in the industry as “42-11 letters”. We have experienced attorneys and staff who can examine title, file mechanic’s liens, and litigate to enforce the same. If you have a need, please call us.