Collections: Motion to Set aside Judgment - Timely Filing

     Timing can be everything. A prime example of this is the case of Trimark Partners v. HST L.L.C. In Trimark the Fairfax Circuit Court ruled that a debtor cannot move to set aside a confessed judgment because he failed to file a motion within twenty one days of learning of the judgment. 

     In Trimark the Court initially entered a judgment against three defendants based on a confession-of-judgment provision in a note. Two of the defendants had executed the note containing the confession-of-judgment terms. A third defendant later had signed an allonge, or attachment to the note, by which he consented to the note obligations. All three defendants later moved to set aside the judgment. 

     Under Virginia Code §8.01-433, a defendant must move to set aside a confessed judgment within twenty one days following notice to him that the judgment has been entered. The judgment can be set aside "on any ground which would have been an adequate defense or set off in an action at law...". 

     The Court found as a matter of fact that on a certain date the debtors were advised by the creditor of the entry of a judgment. A couple weeks later the judgment order was actually served on the debtors. More than twenty one days from the date on which the creditor advised the debtors of the entry of judgment, but not more than twenty one days form the date the judgment order was served on the defendants, the defendants filed a motion to set aside the judgment. The judgment creditor objected to the motion because it was not made within twenty one days of notice. 

     The Court ruled in favor of the creditor, ruling that notice was proven by the creditor's evidence of notice (advising by letter); the Court found that notice was not proven only by the serving of the judgment on the defendants.

     The lesson of Trimark, as is the lesson in so many cases, is to create a paper trail of all transactions, and act promptly. It will usually reap dividends.

Foreclosure: Lost Notes

     Virginia Code §55-59.1(B) addresses the situation where the noteholder has lost the original note. With the frequency of sales of notes on the secondary market, the loss of the original note documents occurs more often than might be expected. The Code provides that if the note or other evidence of indebtedness secured by a deed of trust cannot be produced, and, the beneficiary submits to the trustee an affidavit to that effect, the trustee may proceed to foreclosure. However, the beneficiary must send written notice to the person required to pay the instrument stating that the instrument is unavailable and that a request for sale will be made of the trustee upon the expiration of fourteen days from the date of the mailing of the notice. The notice must be sent by certified mail, return receipt requested, to the last known address of the person required to pay the instrument, as reflected in the records of the beneficiary, and shall include the same and the mailing address of the trustee. The notice must also advise the borrower if the borrower believes that he may be subject to claim by a person other than the beneficiary to enforce the instrument, the debtor may petition the circuit court of the county or city whether the property lies for an order requiring the beneficiary to provide adequate protection against any such claim. Failure to give the notice does not affect the validity of the sale.

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. 

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

     2. Did the defendant make the following statements? 

     3. Were they about the plaintiff? 

     4. Were they heard by someone other than the plaintiff? 

     5. Are the statements false? 

     6. 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? 

    7. 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: Denial of Discharge/Failure to Maintain Records

     The United States Bankruptcy Court at Richmond, in Lubman v. Hall, refused to grant a discharge because the debtors refused to keep records required by the trustee and failed to cooperate with the trustee as required by Bankruptcy Code §521(3) and Rule 4005 of the Federal Rules of Civil Procedure. 

     The Court found that the debtors, a U.S. Postal Service computer programmer and a secretary, refused to comply with the trustee's request that they file income tax returns for the previous years, claiming that they were not required to file such returns. The Court ruled, however, that the debtors had a duty to preserve those records which others in like circumstances would ordinarily keep. The basis for the duty was the necessity for the trustee to be able to fully determine the debtors' financial condition. 

     This decision can be used by creditors in all cases - check the debtor's bankruptcy petition for important missing information and bring this to the trustee's attention.