A Newsletter for individuals and businesses concerned with Creditor’s Rights |
March 2023 | 372nd Edition |
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Collections: Bank Deposits - for Deposit Only
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The United States District Court at Alexandria reviewed a liability question regarding a bank's treatment of a check marked "for deposit only". In the case of Qatar v. First Am. Bank of Va., the Court ruled that a depositary bank violated a restrictive endorsement stating "for deposit only" when it deposited a check into an account other than the account belonging to the named payee of the check. In Qatar, a foreign embassy employee defrauded the embassy over a six-year period by various methods, including depositing checks written to other parties into his own personal accounts with defendant banks. After the embassy discovered this fraudulent scheme, it sued the depositary bank for conversion. The bank succeeded on summary judgment in establishing that it was not liable as a matter of law with respect to two categories of checks in dispute, and it prevailed on a factual issue at trial that relieved it from liability for yet another category of checks.
Only one category of checks remained in dispute. These checks all bore the forged endorsement of the payee named on the face of the check, followed by a stamped "for deposit only" restriction. At trial, the depositary bank raised no defenses, but instead challenged for the first time the Court's assumption that the phrase "for deposit only," without further specification, directs a depositary bank to deposit the funds only into the account of the named payee. The Court reasoned that the question then presented was whether the bank complied with the restrictive endorsement "for deposit only" when it deposited the check bearing that restriction into any person's account, or whether that restriction requires the bank to deposit the check's proceeds only into the account of the named payee. The Court held that the unqualified language "for deposit only" following an endorsement on the back of a check required the bank to place the check's proceeds into the payee's account, and the bank violated that restrictive endorsement when it credited the check to another account. In this cases, specifically, the bank violated the restrictive endorsement in depositing into the employees account checks made payable to others and restrictively endorsed "for deposit only", and thus was liable to the plaintiff for the money converted.
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Court records can be used to find employment if there are recent garnishments against the debtor. |
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Bankruptcy: Dischargeability of Debts Regarding Property Damage-Malice |
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Several cases illustrate well the dischargeability of debts involving property damage. In all cases, the trial and appellate courts are required to adhere to Bankruptcy Code §523(a)(6) which states that a debt causing willful and malicious injury to another entity is not exempt from discharge.
If you have cases involving property damage that may fall within this code section, please let me know.
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Law Review of the Month: Personal Injury |
The complexities of injuries that result from accidents require experienced and aggressive representation. If you are faced with the difficulties of an injury, consult us, we are fully prepared to represent your interests. |
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Real Estate: Statute of Limitations Enforced on Challenge to Bylaws Amendment |
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The Virginia Condominium Act, specifically Virginia Code Section 55-79.71(C), provides for a statute of limitations in regard to challenging amendments to governing documents. The section provides, in part:
“An action to challenge the validity of an amendment adopted by the unit owners’ association pursuant to this section may not be brought more than one year after the amendment is recorded.”
In the case of Godwin v. Bay Point Association Board of Directors, a Norfolk Circuit Court was faced with a homeowner challenge to bylaw amendments. The homeowner, Godwin, had sued the association alleging that it breached its governing documents by taking actions four years earlier and three years earlier that increased her assessment for insurance premiums. The association filed a motion to dismiss Godwin’s complaint on the ground that it was time-barred pursuant to Virginia Code Section 55-79.71(C).
Four years earlier the association’s board of directors signed a resolution regarding physical damage and flood insurance. Three years earlier it drafted and signed a bylaw amendment relating to insurance premiums. The association argued that challenging either of these actions was time-barred under the statute of limitations.
The court ruled that the resolution was not an amendment to the condominium governing documents within the meaning of the act. The court found that, at most, the resolution represented a statement of the board’s opinion that the bylaws should be amended to revise the way insurance premiums were assessed against the unit owners. In the resolution, the board acknowledged the need to amend the bylaws and stated that the amendment process was lengthy and inconsistent with the budget preparation schedule for the upcoming fiscal year. Because the resolution was not an amendment adopted by the unit owners pursuant to the act, the court found that the act’s statute of limitations did not apply. However, the court ruled that the bylaws amendment was an amendment to the governing documents within the definition contemplated by the act. Accordingly, the one-year statute of limitations applied.
Godwin argued that because the association violated mandatory procedures for amending the bylaws, the amendment was null and void, and thus, the statute of limitations did not apply. The court, however, in examining the statute, noted that nothing in the statute suggested that only valid bylaw amendments are subject to the one-year statute of limitations. The court noted that any amendment, not just valid ones, may be challenged within one year. Accordingly, Godwin’s claim was barred by the statute of limitations.
Godwin then tried to argue that there was a breach of fiduciary duty (the legal duty of the board to act in the best interests of the residents). Godwin and the association agreed that an action for such breach must be filed within two years from the date of breach. Godwin argued that, although the association initially breached its fiduciary duty four and three years earlier “when in bad faith it knowingly and willfully” adopted the resolution and the bylaws amendment, there were renewed breaches when the annual budgets were adopted in the last two years, which reflected the change made to assessments for insurance premiums. The court disagreed, finding that any breach of fiduciary duty relating to the change in the insurance premium assessment took place when the association acted four and three years ago to adopt the resolution and bylaw amendment. The latest of these actions occurred over two years prior to Godwin’s filing suit. Therefore, the claim was time-barred.
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Foreclosure: Right to Cure a Default |
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Question: Once a borrower is in default, can he “reinstate the loan”, or, “cure the default” and stop the foreclosure sale? Answer: yes. In general, most deeds of trust contain language that allows a borrower the opportunity to reinstate, or cure, the loan after the due date set out in the note. If the deed of trust contains this language, the note cannot be placed into default and accelerated until the cure period has expired. Government loans such as Fannie Mae and Freddie Mac have very specific requirements. In fact, a borrower can always cure a monetary default and stop a foreclosure up to the time of sale by paying in full, in good funds, the deficient amount, including all costs of the sale. |
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Looking for more Creditor News articles? Check our our Creditor News Blog! |
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Lafayette, Ayers, & Whitlock, PLC is a full-service creditor’s rights firm. While many attorneys do “collections”, few attorneys have the trained expertise and staff to represent creditors in all four areas of Creditor’s Rights—Collections, Bankruptcy, Real Estate and Foreclosure. We do, and, we represent credit unions, banks, loan companies, homeowner associations, doctor’s offices, landlords, small businesses and individuals. In Creditor News we will explore all four areas of Creditor’s Rights.
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Meet the Attorneys of Lafayette, Ayers & Whitlock, PLC |
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Edward S. Whitlock, III, Esq. - Editor
Eddie is a Richmond native with a concentrated law practice in creditor representation. His practice focuses on creditor’s rights (Collection, Bankruptcy, Real Estate, and Foreclosure), but also includes the general practice of law (Business and Will & Estate Planning). Eddie holds a B.A. (1984) in Political Science, and a Juris Doctor (1987) from the University of Richmond. He is the former Chief of Admin/Military Law for the 329th Support Group (Area) in the Virginia Army National Guard. Eddie is the former President of both the Henrico County Bar Association and the Virginia Creditors’ Bar Association. He is the chair of the Virginia State Bar’s Fee Dispute Resolution Program, and a former member of the Virginia State Bar’s Disciplinary Committee. He is a board member of the Henrico Economic Development Authority. He is the Vice President of Home Loans for KOVAR Corporation. He is also a former director of Henrico CASA, and a former adjunct professor of criminal law at J. Sargeant Reynolds Community College.
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Jennifer W. Fischer, Esq. - Co-Editor
Jennifer concentrates her practice in creditor representation (Collection, Bankruptcy, Real Estate, and Foreclosure), but also Business and Will & Estate Planning. Jennifer holds a BS (2011) in business administration from Christopher Newport University, and a Juris Doctorate (2014) from University of Richmond, T.C. Williams School of Law. She was admitted to the Virginia State Bar in October 2014. She is a board member for the Virginia Creditors' Bar association and the Henrico County Bar Association.
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CREDITOR NEWS© 2023. This newsletter is prepared and published by Edward S. Whitlock, III, Esquire, and Jennifer W. Fischer, Esquire, and is provided free of charge. The information contained in this newsletter is general in nature. It is intended to be helpful but does not, and is not meant to, replace consultation with an attorney in connection with a legal problem. Readers needing legal advice should retain competent legal counsel. |
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Lafayette, Ayers & Whitlock, PLC www.lawplc.com
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