Foreign Judgment Enforceable in Virginia

    The Richmond U.S. District Court found that the plaintiff, a British developer of computer and video games, may enforce a judgment from a United Kingdom court finding a breach of a settlement agreement by defendant, a Virginia company, that agreed to distribute the British company’s video game and then failed to pay the company.

Plaintiff, Codemasters Group Holdings Ltd., stated that it issued invoices for the video products it shipped to defendant, SouthPeak Interactive Corp., but SouthPeak failed to pay.  The parties subsequently entered into a settlement agreement in which defendant agreed to pay plaintiff $2 million.  Plaintiff contended that defendant failed to make all payments and breached the settlement agreement, leaving an outstanding balance of $1,265,000 plus interest and late fees.

Plaintiff filed suit in the UK and a court there ordered default judgment against defendant.  Plaintiff subsequently sued to enforce the UK judgment in Virginia.

The court noted that Virginia has adopted the Uniform Foreign Money-Judgments Recognition Act, which allows for the enforcement of a foreign country money judgment that is final and conclusive and enforceable where rendered.

Two issues were raised in the Richmond court: whether the UK court had personal jurisdiction over SouthPeak, and, whether Southpeak had received notice of the UK action in sufficient time to enable it to defend.

    The settlement agreement contained a forum selection clause designating the UK as the forum for resolution of the parties’ dispute.  The agreement established the acquiescence of SouthPeak to the jurisdiction of the UK court.  Thus, because prior to the commencement of the UK action SouthPeak agreed to submit to the jurisdiction of the UK court, the UK had personal jurisdiction over SouthPeak.

SouthPeak argued that proper service of process did not occur pursuant to Virginia law, so enforcement of the foreign judgment should not be allowed.  The court disagreed.  The court determined that a plain reading of the Uniform Foreign Money-Judgments Recognition Act simply requires notice, and, SouthPeak had actual notice of the proceedings in the UK.  Accordingly, the foreign judgment could be enforced.

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.

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.

Payroll Deduction

    Payroll deduction is still an excellent way to ensure timely payments. Debtor payments become virtually painless, and the debt is reduced without the debtor having to write a separate check.

Traditional payroll deductions (from company to employee's credit union) are not the only way to achieve this result. Voluntary wage assignments can be prepared and submitted through almost any payroll office.

In the case of In re: Michael K. Hedrick, the United States Bankruptcy Court at Alexandria held that in a Chapter 13 case, converted from a Chapter 7 case, a credit union may not amend its proof of claim for a debt from an auto loan.

Prior to filing for bankruptcy, the debtors defaulted on their auto loan.  The vehicle was repossessed and sold.  There was a deficiency balance due after the sale.  The credit union filed a proof of claim for the joint deficiency claim of $5,693.00, as of the date the case was filed.  Three months after the confirmation of the debtor’s modified chapter 13 plan, the credit union filed an amended proof of claim, increasing its claim by $2,430.00, for post petition interest and attorney’s fees.

The credit union argued that a Chapter 13 plan must pay unsecured creditors at least as much as under the Chapter 13 plan as they would receive if the case were under Chapter 7.  If this case had been under Chapter 7, joint unsecured creditors - but not individual unsecured creditors - would be paid in full together with interest because of the equity in the jointly owned house.  The credit union used the contract rate of interest.  It treated its post petition attorney’s fees the same as post petition interest.

The Court noted that even though the proper allowed claim is the original claim filed by the credit union, the credit union may actually be paid more than its allowed claim if the estate is a solvent estate.  The Court “shall confirm” a Chapter 13 plan if all of the requirements of Bankruptcy Code Section 1325(a) are satisfied.  One requirement is that the distribution to unsecured creditors must be at least as much as they would have received had the case been a Chapter 7 case.  The provision for interest on allowed claims in solvent estates is a part of this calculation.

The Court ruled, though, that the interest rate is the federal judgment rate, not the contract rate or the applicable state rate.  There is no similar statutory provision for attorney’s fees or for other reasonable fees, costs or charges provided for under the agreement which the claim arose.

The Court ruled that the credit union’s first proof of claim is the proper proof of claim.  The allowed claim of an unsecured creditor in a solvent estate is the same as in an insolvent estate.  It is determined as of the date of the filing of the petition and does not include post petition interest, attorney’s fees costs or other contractual charges.

The Court ruled that if the terms of a confirmed Chapter 13 plan include post petition interest, the Chapter 13 trustee will pay that interest as provided in the plan.  If the plan does not provide for post petition interest, the trustee may not pay post petition interest.  In this case, the confirmed plan contains no such provision.

The Court concluded that the proper construction of the Chapter 13 plan was that the allowed joint unsecured claims would be paid 100 percent of the amount allowed joint unsecured claim without interest.  Had the matter been brought to the Court’s attention at the confirmation hearing, the plan would not have been confirmed without a provision for payment of post petition interest on allowed joint unsecured claims.  It was not and the plan was confirmed.

The lesson of Hedrick: read Chapter 13 plans very carefully and object timely.

Confessed Judgment Set Aside

    The United States District Court at Alexandria, Virginia, set aside a confessed judgment in the case of Benton Land Fund, L.P. v. NvMercure Ltd Partnership because the entry of the judgment was by a party not specifically authorized to confess judgment.  The Court found that the provisions in the note at issue stated that judgment may be confessed by "any attorney admitted to practice in any jurisdiction or any vice president or senior vice president of the bank".  The Court found that this language was not sufficiently specific to allow the plaintiff limited partnership to confess judgment because of certain ambiguities among the documents in identifying the "Bank" referred to in the note.  Further, the language in the note did not entitle the person who actually confessed judgment to act as the attorney-in-fact for that purpose.

This case serves as another reminder as to why competent legal advice should be sought, and why loan documents and contracts should be carefully read and strictly followed.