Bankruptcy: Debt Declared Nondischargeable due to Debtors Knowledge of Error

     The U.S. District Court in Alexandria, in the case of Nawroz v. Wells Fargo Advisors LLC, in August, 2012, affirmed a bankruptcy court decision which held that a debtor cannot discharge in bankruptcy her obligation to repay a bank for the $28,029.99 that the bank mistakenly credited her IRA.
     Wells Fargo, after mistakenly transferring the funds into the debtor’s IRA, then transferred the balance of debtor’s account, $56,043, to a checking account at another bank, and then closed the debtor’s account with Wells Fargo.
     At trial, the debtor testified that during that time period, she was severely depressed, her home was in foreclose, she lost her business and she was not attending to her business affairs. She also testified that she did not know the funds not belonging to her had been mistakenly transferred to her new checking account. Shortly after the transfer of funds to the checking account, the debtor wrote a checking for $81,000 to Khalil Wadedi, allegedly to avert a family emergency arising from the kidnapping of a family member in Afghanistan. At the time, the checking account held less than $81,000.
     Wells Fargo won a default judgment against the debtor for $36,962.71, covering the funds mistakenly transferred, attorney’s fees, prejudgment interest and costs.
     During the debtor’s subsequent bankruptcy proceedings the bankruptcy court said the debt to Wells Fargo was nondischargeable pursuant to Bankruptcy Code Section 523 (a)(6). The debtor appealed this decision.
     The District Court noted that the debtor knew that her CD account with Wells Fargo held no more than $28,032 in April 2008, and therefore the amount transferred from Wells Fargo to the different checking account should not have exceeded this amount. The debtor subsequently used $81,000 from the checking account after the transfer of funds from Wells Fargo. But for the mistaken credit by Wells Fargo of $28,029, the checking account would have been no more than $56,000 and therefore debtor’s $81,000 check would not have cleared.
     The debtor admitted that she knew the balance of the CD account; therefore, the court reasoned that the debtor must have known that the amount transferred from Wells Fargo to the checking account should not have exceeded $28,032, regardless of what account held the funds prior to this transfer, and that the debtor was not the true owner of approximately $28,000 of the amount in her checking account in May, 2008.

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 the upcoming issues of Creditor News we will explore foreclosures from beginning to end. From the preparation of the deed of trust, to final accounting after sale.

    Check out issues of Creditor News by visiting http://www.lawplc.com.

Real Estate: Common Area Parking Spaces Must be Assigned Equally

     The Court of Appeals of Virginia recently issued an opinion affirming a Circuit Court decision holding that common area parking spaces must be assigned equally. The case involved a suit by a homeowner, Patrick Batt, against Manchester Oaks subdivision in Fairfax County. The subdivision contained 57 townhouses, 30 of which were constructed with a garage and driveway (garaged lots) and 27 of which were constructed with an additional bedroom and bathroom in lieu of a garage (ungaraged lots). The subdivision included a common area with 72 parking spaces.
     The subdivision was subject to a declaration, administered by the homeowners association that gave the association the right to designate a maximum of two parking spaces for the exclusive use of each lot owner. However, the association was not required to ensure that parking spaces were available to any particular owner or to oversee use of the parking spaces. Batt had purchased a garaged lot in 1990, before the subdivision was complete. At that time, residents parked wherever they chose. In 1993 or 1994, the developer began assigning two parking spaces to each ungaraged lot. The remaining 18 parking spaces were designated as “visitor” parking, available to all lot owners on a first-come, first-served basis.
     In 2009, the association issued one visitor parking permit to each lot owner and posted a parking policy on its website. Any vehicle not displaying a permit while parked in the visitor parking spaces would be towed. In December 2009, the association amended the declaration to provide that the association had the right to designate two parking spaces exclusively to each of the ungaraged lot owners on a non-uniform and preferential basis. In June 2010, Batt sued the association, claiming that the unequal treatment of owners over parking space assignments violated the declaration. The association argued that Batt’s suit was barred by the December 2009 amendment to the declaration.
     The circuit court ruled in Batt’s favor, finding that the amendment was invalid for six reasons. The association appealed. The Court of Appeals ruled, in summary, that equality is inherent in the definition of “common area.” A “common area” is defined as, “[a]n area owned and used in common by residents of a condominium, subdivision, or planned-unit development.” Black’s Law Dictionary defines “in common” to mean “[s]hared equally with others, undivided into separately owned parts.” Accordingly, the court held that the association must assign common area parking spaces to all lot owners equally, if at all, unless the declaration expressly provided otherwise. In this case, the court did not find that unequal assignment was authorized.

Bankruptcy: Post Discharge Mortgage Statement Held Not to Be a Violation

     The U.S. District Court in Charlottesville, in the case of Pearson v. Bank of America affirmed a bankruptcy court decision which held that the bank did not violate the discharge injunction against creditor action under bankruptcy code section 524(a) by sending monthly statements.
     In Pearson, although the debtor had obtained a Chapter 7 discharge for her debt with the bank, she continued to receive a routine monthly statement from her Bank of America mortgage that provided principal balances, estimated payments, payment instructions and information on how payments would be posted.
     The language in the opening section of the Mortgage Statement clearly stated that the debtor’s loans had been discharged, that such discharge insulated debtor from any efforts by anyone to collect this discharged debt as a personal liability, and that the debtor could not be pressured to pay this debt. The Mortgage Statement’s opening section referenced the fact that some homeowners become concerned after receiving statements and therefore assured the debtor that such letters were sent as a courtesy, and were not a demand for payment.
     The statements also provided that no monthly statements would be sent in the future if the debtor would simply make one toll-free telephone call to an identified number.
     Considering all of the facts, the court held that the statements did not represent a violation of the discharge injunction.