Foreclosure: 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. 

Real Estate: Using Homeowner Association Liens to Secure an Interest in Real Estate

     In previous blogs, we have been discussing the benefits of using real estate to improve creditors’ positions. As I have emphasized, properly securing debts through real estate could make the difference between collecting the funds and incurring a loss. In this edition, we will review the benefits of using homeowner association liens to aid in the collection of your debt. 

   Virginia Code §55-516 provides for special procedures for the collection of homeowners association dues. This code section allows associations to place a lien on the land for unpaid assessments, as well as give associations a priority over certain other debts. To perfect the lien, however, it must be filed before the expiration of twelve months from the time the first such assessment became due and payable. This filing must be by a memorandum filed in the circuit court of the county or city where the development is located. The memorandum must contain the information specified in the statute. Before filing the lien, written notice must be sent to the property owner by certified mail giving at least ten days prior notice that a lien will be filed. Suit to foreclose on the lien must be brought within thirty six months of filing. We will review foreclosure suit procedures in the next issue. 

     We have experienced attorneys and staff who can examine title, file homeowner association liens, and litigate to enforce the same. 

Bankruptcy: Garnished Wages - Execution of Lien - Recovery of Funds

     In the case of In Re Wilkinson, the United States Bankruptcy Court at Alexandria, Virginia denied the debtor's motion to avoid the creditor's execution lien; the debtor's wages had been garnished in execution of a judgment lien more than 90 days before the debtor filed his Chapter 7 petition. The Bankruptcy Court ruled that the debtor could not recover the garnished wages from the judgment creditor even though the order directing payment of the garnished wages to the creditor was entered within the 90-day period.

     The Bankruptcy Court stated that the issue was not whether a debtor could recover funds withheld from his wages more than 90 days before he filed his Chapter 7 petition, but whether the order of payment requiring the employer to pay those funds to the judgment creditor was entered within 90 days of the bankruptcy filing.

     The Bankruptcy Court concluded that the debtor could not succeed under the lien avoidance provisions of Bankruptcy Code §522 (f) because he no longer had an interest in the garnished funds as of the date he filed his petition. The Bankruptcy Court also concluded that the debtor could not succeed by stepping into the trustee's shoes under Bankruptcy Code §522 (h) and recovering the funds paid over to the judgment creditor as a preference because the judgment creditor's execution lien became fixed outside the 90-day preference period, and the payment within the preference period did not enable the creditor to obtain more than it would in a Chapter 7 liquidation.

     Accordingly, the Bankruptcy Court denied the debtor's motion to avoid the execution lien.

Collections: Liability for Charges above the Credit Limit - Part 2

    In a previous blog, we looked at two fact patterns involving situations where a customer makes retail purchases for products in an amount greater than the customer’s established credit limit – specifically, if the customer later fails to pay for the product, can he be successfully sued for payment. In those situations, we found that a court will likely hold a customer liable for charges that exceed the originally agreed upon credit limit. The credit terms require the customer to pay any and all sums that become payable because of the express terms of the contract and the intentions of the contracting parties. The next two fact patterns present new issues. 

     Fact Pattern Three: When the retail account was originally opened, the credit limit (stated in a letter to the customer) was set at $4,000. The credit terms in the credit application state the applicant agrees "to pay any and all sums that may become payable under this account". Despite the credit limit, customer sends one of his employees to retailer to make a purchase, with customer knowing what the cost of the purchase will be. Retailer allows the purchase over the $4,000 limit. Later customer fails to make full payment. Retailer sues customer for the amount owed, let us say that it is $6,000. Customer raises the defense that charges above the credit limit should not have been allowed. In what amount should the retailer be able to judgment against the customer? 

     In addition to the contract issue discussed in the previous patterns, this fact pattern presents an agency law issue. The Circuit Court of the City of Richmond dealt with a similar issue in Chevy Chase Savings Bank v. Strong. In this case, the bank issued a credit card. A card user then incurred charges on the credit card but the card user was the card owner’s husband. The court held that the wife was liable for the charges because she gave her husband authority to use the card. The husband was an agent, and was therefore only liable if the wife was able to prove that her husband exceeded his authority or that he agreed to become personally liable.

     In this fact pattern, the customer has given his employee authority to act on his behalf so the employee is his agent and the customer is the principal. As principal, the customer is liable for all charges. The credit was given to the customer, so he is liable for the charges, unless he is able to prove that the employee exceeded his authority or agree to become personally liable. In this case, the employee did not act outside of his authority and did not agree to become personally liable, so the customer will be liable for a balance incurred. 

     Fact Pattern Four: When the retail account was originally opened, the credit limit (stated in a letter to the customer) was set at $4,000. The credit terms in the credit application state the applicant agrees "to pay any and all sums that may become payable under this account". Despite the credit limit, one of customer’s employees goes to retailer to make a purchase, without customer’s knowing what the cost of the purchase will be. Retailer allows the purchase over the $4,000 limit. Later customer fails to make full payment. Retailer sues customer for the amount owed, let us say that it is $6,000. Customer raises the defense that charges above the credit limit should not have been allowed. In what amount should the retailer be able to judgment against the customer?

     Although there was not express authority to spend a specific amount like the previous situation, the same rule applies. The employee acted as an agent for the customer. The customer is liable for the debt unless the customer is able to prove that the employee acted outside the authority given. However, similar to Chevy Chase Savings Bank v. Strong¸ evidence that the customer did not specify an amount to spend is not likely to be sufficient evidence to prove that the agent acted beyond to scope of authority given.