Bankruptcy: Dischargeability of Debts - Reliance on Financial Statement

     In the case of Paterno Imports Ltd. v. McBee, Judge Tice of the United States Bankruptcy Court, Eastern District of Virginia, sitting in Richmond, held that a plaintiff/creditor, a wine import company who had obtained a judgment against the debtor and his business, failed to prove that it required or relied on the alleged material misrepresentations in a financial statement provided to the debtor company. Accordingly, the judgment the import company ultimately obtained against the debtor and his business was not exempt from discharge. 

     The Court ruled that the case hinged upon the events surrounding a meeting between the debtor, the debtor's counsel, the plaintiff and the bank official. Each party presented evidence in diametric opposition to the other party's claims. The oral testimony presented by the parties at trial was, in its most important aspect, conflicting and irreconcilable. 

     The Court pointed out that in a dischargeability case, the burden of proof is on the plaintiff. The Court found that the plaintiff failed in its burden. Despite the fact that the plaintiff's counsel prepared extensive documentation which the debtor was required to sign both personally and for his company, the debtor's guaranty did not mention a financial statement, and no other writing presented at trial suggested that the guaranty was conditioned upon the plaintiff's approval or acceptance of the debtor's financial statement. 

     In summary, the Court found that the plaintiff failed to establish (1) that the plaintiff and the debtor entered into an agreement under which the plaintiff would forbear from pursuing further collection efforts against the debtor's business and give it time to resolve its financial difficulties, in exchange for the debtor's personal guaranty of the company's debt to the plaintiff; (2) that any transaction between the plaintiff and the debtor was conditioned upon the plaintiff's acceptance or approval of the debtor's personal financial statement; or (3) that at the meeting of the parties the debtor produced a personal financial statement or that there was any discussion of such a statement. The Court stated that these findings required the Court to conclude that the plaintiff did not rely upon the debtor's personal financial statement or any other statement. Therefore, the debt was discharged.

Foreclosure: Obtaining Possession after Foreclosure

     Upon purchasing property at a foreclosure sale, it is not uncommon to have a “holdover tenant”. If this occurs, you can obtain possession of the property by filing a Summons for Unlawful Detainer in the appropriate General District Court. The applicable statute requires that the plaintiff prove “a right to the possession of the premises at the time of the commencement of the suit.” The only evidence that is usually required is (a) a copy of the recorded trustee’s deed, since the facts recited therein are prima facie evidence of their truth, and (b) a copy of the notice to vacate sent to the occupant(s).

     On the date of the initial return, if the defendant fails to appear, possession will be granted. If the matter is contested, most courts set a new date for trial. In contested cases, issues are usually related to notice and service, so the trustee should be prepared to present evidence that the foreclosure sale was properly advertised, noticed and conducted.

     The judgment for possession is not final until 10 days after it is entered, and most courts will not issue a writ of possession during that 10-day pendency. If an appeal is noted within the 10-day period, the defendant must perfect the appeal by posting an appeal bond and paying within 30 days of the date of the judgment the applicable writ and service fees for the circuit court. Most judges are sympathetic to require significant appeal bonds equating with the former mortgage payments. 

     Eviction is accomplished using a “Request for Writ of Possession.” A writ of possession may be issued on an unlawful detainer for up to one year from the date of judgment. When requesting the writ of possession, provide contact information for both the Sheriff and the person who will supervise the eviction of the new owner; the Sheriff will coordinate a date and time to serve the writ of possession and maintain the peace while the owner physically evicts the personal property of the occupant(s) and secures the property.

Foreclosure: Obtaining Possession after Foreclosure

     Upon purchasing property at a foreclosure sale, it is not uncommon to have a “holdover tenant”. If this occurs, you can obtain possession of the property by filing a Summons for Unlawful Detainer in the appropriate General District Court. The applicable statute requires that the plaintiff prove “a right to the possession of the premises at the time of the commencement of the suit.” The only evidence that is usually required is (a) a copy of the recorded trustee’s deed, since the facts recited therein are prima facie evidence of their truth, and (b) a copy of the notice to vacate sent to the occupant(s).
     On the date of the initial return, if the defendant fails to appear, possession will be granted. If the matter is contested, most courts set a new date for trial. In contested cases, issues are usually related to notice and service, so the trustee should be prepared to present evidence that the foreclosure sale was properly advertised, noticed and conducted.
     The judgment for possession is not final until 10 days after it is entered, and most courts will not issue a writ of possession during that 10-day pendency. If an appeal is noted within the 10-day period, the defendant must perfect the appeal by posting an appeal bond and paying within 30 days of the date of the judgment the applicable writ and service fees for the circuit court. Most judges are sympathetic to require significant appeal bonds equating with the former mortgage payments.  

     Eviction is accomplished using a “Request for Writ of Possession.” A writ of possession may be issued on an unlawful detainer for up to one year from the date of judgment. When requesting the writ of possession, provide contact information for both the Sheriff and the person who will supervise the eviction of the new owner; the Sheriff will coordinate a date and time to serve the writ of possession and maintain the peace while the owner physically evicts the personal property of the occupant(s) and secures the property.