Monday, May 28, 2018

Real Estate: Homeowners' Association Wins Damages on Owner Violations

     There has been much litigation over HOA violations in the last few years. Circuit Courts have been scrutinizing HOA violation claims very carefully. Enforcement and damages for violations can be won. The December 2011 Loudon County Circuit Court case of Lee’s Crossing Homeowners’ Association v. Zinone is a good example of such enforcement. In Lee’s Crossing, the court found that in building her home, the homeowner committed multiple violations of the plan approved by the Architectural Review Board. Ultimately, the court assessed damages in favor of the homeowners’ association on the basis of “one overriding violation,” the failure to comply with the ARB-approved application.

Monday, May 21, 2018

Bankruptcy: Repossessed Collateral - Notice of Private Sale

     The case of In Re Phelps, decided by the United States Bankruptcy Court, serves as a good example of what creditors should do when conducting a private sale of repossessed collateral. 
     The Court examined Virginia Code §8.9-504 to determine if the creditor gave the debtors "reasonable notification" of the private sale of the collateral because the debtors objected to the creditor's claim for the deficiency amount following the sale.
     The Court found that in selling the collateral, Virginia Code §8.9-504(3) requires 1) that the sale must be conducted in a commercially reasonable manner and 2) that the debtor receive reasonable notice of the sale unless the debtor signed a waiver after default. The purpose of the notice provision is to give the debtor and any other interested parties sufficient time to take appropriate steps to protect their interests by taking part in the sale if they so desired. Failure to provide any notice of sale makes it commercially unreasonable. The reasonable notice required by Virginia Code §8.9-504(3) is not defined in the statute.
     The debtors asserted that 1) they did not receive actual notice of the sale, and 2) even if they had received the creditor's letter, it failed to reasonably notify them of the private sale because it did not list the time, place or terms of the sale.
     The Court found that the notice was properly sent because it was sent to the address provided by the debtors, and, because the certified mail receipt was signed.
     The Court found that Virginia Code §8.9-504(3) only requires that the creditor reasonably notify the debtors of the time after which the sale is to be made. In this case, the creditor's letter advised the debtors of the sale and that they had ten days to cure their default or they would be liable for any deficiency after the sale. Judge Tice further found that although the method, time, place and terms of the sale must be commercially reasonable, the creditor was not required to give the debtors specific notice of the method, manner, time, place or terms of the private sale.
     Although this case supports creditors' rights, and the need for only minimum compliance with the statutory requirements, I always recommend that notification be as thorough as possible to avoid later costly challenges in court.

Monday, May 14, 2018

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, 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.

Monday, May 7, 2018

Foreclosure: Foreclosure Basics

     Foreclosure law is a creature of state statute. Accordingly, each state’s laws are different. Because the statute controls, courts will enforce strict adherence to the exact words and requirements. Failing to fully comply with statutory mandates will likely result in defective foreclosures and costly work. 
     In upcoming blogs we will explore foreclosures from beginning to end. From the preparation of the deed of trust, to final accounting after sale.