Monday, February 26, 2018

Real Estate: Homeowner Associations - Damages Caused by Common Area Tree

     Townes at Grand Oaks Townhouse Association, Inc. v. Baxter is a case from Richmond Circuit Court that illustrates the importance of carefully drafted HOA agreements. The HOA sought to recover expenses for removing a tree that fell from common area onto a homeowner’s condo. The Richmond Circuit Court held that the HOA agreement did not exempt the HOA from paying removal costs because a portion of the tree remained on the common area. The court noted that there was no Virginia authority for these facts, but stated that the Supreme Court of Virginia ruled that in cases of fallen trees between adjoining properties in the absence of negligence, there is no liability for property damages on the landowner from where the tree fell. However, the HOA agreement is a contract that created the obligation for the HOA. The agreement had a provision requiring the HOA to maintain and replace trees, and another provision exempting the HOA from liability to an owner for repairing or replacing any portion of the lot or the improvements provided the homeowner has insurance as required by the agreement. The HOA relied on the first provision, but the court determined that that reliance was misplaced as it did not cover this situation. The HOA relied on the second provision because the homeowner did not have the required insurance for “the structure of each lot”, but only insurance for the inside of the home. However, the court heard evidence from the homeowner that he understood the language to only require internal insurance. The court noted three primary reasons for holding for the homeowner:
     (1) “Removal of the tree from the lot is not a repair or replacement, but merely something necessary before the physical work of restoration of the damaged structure can begin.”
     (2) “The exemption from liability applies when the homeowner has "fire and extended coverage insurance" with applicable coverage. Considering the varying types of insurance that the market may provide, there is no evidence that the insurance required under the contract terminology must cover tree removal. Whether such a policy would is left to speculation.”
     (3) “The tree removal would necessarily involve removal of a portion of the tree from the common area as well as from Defendant's lot and home. I question whether, in any event, the total removal cost should be assigned to the defendant rather than some prorated amount.”
     It is important to ensure that HOA agreements include provisions that would govern a broad spectrum of potential issues and disputes. 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, February 19, 2018

Bankruptcy: Post-Discharge Injunction - New Note with Credit Union

     The United States Bankruptcy Court, Western District of Virginia, Harrisonburg, ruled in the case of Mickens v. Waynesboro Dupont Employees Credit Union, Inc. that a credit union that facilitated a discharged debtor’s cosigning of a new promissory note that covered the credit union debt that previously was discharged was liable for a violation of the bankruptcy law’s post-discharge injunction statute, and the debtor had no liability for the note and was entitled to damages and attorney’s fees.
     The Court decided that the issue was whether the fact that the credit union obtained a new note signed by the debtor for his discharged obligation constituted an “act to collect, recover or offset” the discharged debt in violation of the post-discharge injunction under Bankruptcy Code §524 (a)(2).
     The Court in Mickens decided that the credit union’s act, permitting the debtor to cosign the new note, expressly placed the debtor in the same state of personal liability for the exact debt which was discharged. The notice to the cosigner stated this fact. Bankruptcy Code § 524 (c) lays out detailed requirements which must be met for a debtor to reaffirm a pre-petition debt and thereby remain obligated to pay such a debt in spite of the discharge injunction. The Court ruled that the credit union’s actions would be subject to Bankruptcy Code §524 (c). Therefore, they must fall within the definition of “an act” for the purposes of the discharge injunction, however narrowly that phrase may be defined.
     The Court ruled that while no cases with identical facts were readily apparent at the time it ruled, it concluded that the cases which most closely resembled the fact pattern for this case were those which involved “ clumsy attempts to avoid the injunction.” In these cases the creditors’ attempt to circumvent the requirements in the Bankruptcy Code §524 (c) and (d) through a reliance on the voluntary repayment provision in Bankruptcy Code §524 (f).
     The Court in Mickens ruled that the credit union could not make any serious argument that its actions or new note even attempted to comply with the requirements of Bankruptcy Code §524 (c) and (d). There could be no doubt the credit union was aware of the injunction and intentionally permitted and facilitated the debtor’s signing a new note which returned him to his pre-petition position of personal liability for the pre-petition debt. Such action constituted a willful violation of the post-discharge injunction of Bankruptcy Code §524 (a)(2).
     The Court ruled that the credit union was in violation of Bankruptcy Code §524 (a)(2) and the liability of debtor on the note he cosigned with a friend was void ab initio. The credit union also was liable for damages and attorney’s fees.

Monday, February 12, 2018

Bankruptcy: No Discharge After Bankruptcy Fraud

     In the case of Groggins v. Robbins, U.S. Trustee, a Roanoke United States District Court upheld a bankruptcy court decision denying a discharge to a Chapter 7 debtor convicted of bankruptcy fraud. The Court in Groggins agreed with the U.S. Trustee’s argument that the debtor’s bankruptcy fraud conviction collaterally estopped him from contending that he had not made a false oath in connection with his Virginia bankruptcy case, and, thus a discharge was unwarranted. The debtor in Groggins was charged, and pled guilty, to fraud for making a false oath, in that he failed to disclose that he had a prior bankruptcy filing.

Monday, February 5, 2018

Collections: Garnishments Out-of-State

     While I have had good results in issuing garnishments out of state, especially when the garnishee is a bank that operates nationwide, success is not always guaranteed. Diversity in jurisdiction does create some issues. A good example of this arose in a case in the United States District Court where the Court granted a debtor’s motion to quash a garnishment summons after finding that the debtor’s wages were not located in Virginia. The garnishment summons had been issued by a Virginia creditor that was a Virginia hospital. The debtor was a Pennsylvania resident doctor. The garnishee was an Ohio company. The court ruled that the garnishment summons issued by the court was ineffective to garnish the wages not located in Virginia.