Creditor's Rights/Suretyship

Question 1

How long does a creditor have a right to enforce a money judgment?

Answer 1

20 years from the date of judgment and may be extended for an additional 20 years by motion to the court that rendered the judgment. The debtor need only be given notice of the motion and need not be formally served.

Question 2

In VA, how does a creditor enforce a sister state money judgment?

Answer 2

creditor need only 1) register the judgment in the office of the clerk of court where judgment is sought to be enforced and 2) notify the D of the registration in writing.

Question 3

A _________ ___ is required which gives 3rd parties notice of the judgment interest in the property

Answer 3

Public Act (recording a real estate lien or repossessing property rights)

Question 4

How long does a creditor have a right to enforce a Judgment lien?

Answer 4

Continues indefinitely, BUT, must be enforced within 10 years of the debtor’s sale to any purchaser.

Question 5

What is the timeframe for enforceing a judgment lien?

Answer 5

Must bring suit in equity within 20 years from the date of docketing

Question 6

What is the writ of fieri facias?

Answer 6

commads the officer to whom it was delivered to find tangible personal property of debtor, seize it and sell it to satisfy a judgment

Question 7

What are the mechanics of writ of fi fa?

Answer 7

clerk must issue at 21 days from the date of judgment directing the sheriff to levy on the debtor’s property, if the levy occurs after the return date, it is void. lien is recorded at time of levy

Question 8

How is an enforcement of lien through garnishment obtained?

Answer 8

A summons of garnishment must be served on the garnishee on or before the return date on the fi fa. debtor must also be given notice. Failure to serve proper notice on the debtor is grounds to quash.

Question 9

What is not subject to garnishment?

Answer 9

negotiable instruments or a negotiable stock certificate must be levied upon to be effective; garnishment of the issuer has no effect. A joint bank account generally is subject to garnishment to the extent of the debtor’s interest. - There is a rebuttable presumption that the nondebtor spouse owns one half of the account

Question 10

What are creditor’s rights when the debtor has died?

Answer 10

claims of the creditor will be paid out of the decedent’s personalty to the extent it is sufficient

Question 11

What is Attachments (detinue) in creditor’s rights law?

Answer 11

attachment is a prejudgment remedy by which a plaintiff may obtain a lien on the defendant’s property judgment to satisfy an anticipated money judgment

Question 12

What are the grounds for attachment?

Answer 12

P must allege one of the following:

1) D is nonresident of VA or foreign corporation
2) D has made or is about the make a fradulent conveyance
3) D has removed or is about to remove his property from VA
4) D has concealed or is about to conceal his property with the intent to hinder or delay credotrs
5) D is trying to move himself out of VA

Question 13

What is a memorandum Lis Pendens

Answer 13

A document placed in the real estate recording office indicating that real property is subject to litigations. Puts BFPs on notice. If a lien is to be effective against a BFP, lis pendens must be filed.

Question 14

What is a suretyship?

Answer 14

arises when 1 person agrees to be liable for the debt or obligation of another. - A surety is the person who promises along with the debtor to pay the debtor’s obligation when it becomes due. A surety is directly liable on the obligation

Question 15

What is a guarantor?

Answer 15

a guarantor is a person who promises to pay the obligation of a debtor only if the debtor defaults. - creditor may only seek guarantor for payment after seeking payment from debtor

Question 16

How does the SoF apply to Suretys and what are the exceptions?

Answer 16

suretyship not evidenced by a writing signed will not be enforceable EXCEPT:

1) a promise that is not collateral to another person’s promise to pay is not a suretyship bound by SoF.
2) Also, if the main purpose of the surety’s promise is his own pecuniary advatacge the promise is not within the SoF

Question 17

Subrogation in suretyship

Answer 17

After full payment by the surety, the surety is entitled to step in to the shoes of the creditor and can use all the remedies the creditor could use against the principal

Question 18

What is the general process for turning a victorious lawsuit into cash?

Answer 18

1) Get a judgment
2) use the judgment to obtain a lien on a particular piece of property
3) Foreclose on the lien and sell the property

Question 19

What is the purpose of the lien?

Answer 19

The lien protects the right of the creditor in the debtor’s property against other creditors. - To get this protection, all other creditors must be put notice of the lien by a PUBLIC ACT

Question 20

What will VA do to help you collect a debt BEFORE you have a judgment?

Answer 20

VA allows you to obtain a prejudgment lien. This is officially called Prejudgment Attachment ( or Detinue) - essentially calling “dibs” on a piece of property for if you win your suit.

Question 21

How is a prejudgment lien obtained?

Answer 21

petition the court for a “writ of attachment” (issued ancillary to suit OR to commence suit and establish jdx)

1) File w/judge
2) allege specific facts supporting grounds for attachment
3) judge has ex parte hearing
4) D has 10 days to challenge lien

Question 22

You must have proper grounds for a “writ of attachment”. What are they?

Answer 22

1) D is non resident
2) Fradulent conveyance has happened or is about to happen
3) D is going to move the property out of state
4) D is concealing property
5) D is leaving state permanently

Question 23

How does pre-judgment lien attach to property?

Answer 23

PP: must be a proper levy on PP (if PP is 3rd parties possession, 3P must be joined as a co-d in the underlying lawsuit)

RP: 1) Officers RETURN (doc prepared by sheriff in response to writ of attachment) must describe the property 2) attachment served on the party in possession

Important Notes: 1) Attachment gives creditor an “Unconsummated lien” - lien becomes connsummated when P wins judgment. - If Creditor wins judgment, they are given priority in property against other creditors back to time of attachment.

2) in order to take priority over a BFP, must first file a lis pendens in real estate recording office

Question 24

How can a D get a judge to quash pre-judgdment lien?

Answer 24

1) lien is invalid (no proper grounds listed)
2) lien is unsupported (is proper ground listed, but no facts supporting)
3) P unlikely to prevail

Question 25

What are surety’s rights against creditors?

Answer 25

1) Surety can require the creditor to proceed first against the debtor. (only in VA, different than fed rule
2) Surety can raise duress or fraud on debtor’s debt to creditor. i)
3) Surety can’t raise the personal defenses: infancy, lack of capacity, bankruptcy, statute of limitations
4) surety has defense if contract between debtor and creditor is moidfied (gratuitous surety fully discharged, compensated discharged if material change)

(no right of notification of debtor’s default)

Question 26

What rights does a surety have against a debtor?

Answer 26

1) Right of exoneration ( cause of action to force debtor to pay her debt to the creditor
2) right of indemnification - they can force a debtor to pay the surety for money paid by the surety to the creditor

Question 27

If gratuitous surety provides a guarantee at the time os sale on credit there _____ consideration. Whereas if the gratuitous sureter promises to guartee after the sale, there -_____ consideration.

Answer 27

IS; IS NOT

There has to be consideration for a surety to be effective.

Question 28

Which of the following defenses may a surety invoke?

A Duress upon the surety by the principal.
B Duress upon the principal by the creditor.
C Incapacity of the principal to form a contract.
D Bankruptcy of the principal.

Answer 28

Duress upon the principal by the creditor

A surety will not be liable if the principal’s promise was obtained by duress, as long as the surety was unaware of the duress.

Question 29

A creditor may seek payment from a guarantor of collectibility:

Answer 29

Only after exhausting all legal remedies

Question 30

A surety’s promise is not enforceable unless it is supported by ________. Where a surety does not make his promise until ______ the creditor has performed, there is no consideration to support the surety’s promise, since the debtor has not incurred any new _________in exchange for the surety’s promise.

Answer 30

consideration; After; deteriment

Question 31

A surety has an absolute right to be reimbursed by the principal except when?

Answer 31

if the principal is not aware of the suretyship arrangement.

Question 32

A surety’s right to sue the principal debtor in order to compel the principal debtor to pay the creditor is most commonly referred to as:

Answer 32

exoneration

Question 33

What would discharge a surety’s obligations?

Answer 33

If a creditor releases all or part of the collateral given by the creditor, the surety is released to the extent of the value of the collateral released. The loss of collateral through mere inaction or passive negligence on the part of a creditor is insufficient, in and of itself, to discharge a surety from his obligation.

Question 34

What may a creditor discover about the debtor with postjudgment interrogatories?

Answer 34

Real or personal property, wherever located

Question 35

the context of postjudgment interrogatories, what is a capias?

Answer 35

A writ instructing an officer to take the debtor into custody until he properly answers the interrogatories.

Question 36

From the creditor’s perspective, a debtor holds which types of property?

Answer 36

Exempt property and nonexempt property still in the debtor’s possession or that the debtor fraudulently transferred.

Question 37

Avoiding or upsetting a fraudulent transfer made by a debtor means:

Answer 37

Title to the property will be restored to the debtor so the creditor attacking the transfer may sell it.

Question 38

When may a debtor’s transfer of Real Property to a third party be avoided by a creditor?

Answer 38

if if the debtor acted with fraudulent intent,

and the transferee knew, or should have known, of the debtor’s fraudulent intent.

Question 39

Debtor sells property to Buyer for less than fair market value. Buyer is unaware of Debtor’s fraudulent intent to protect property from Creditor’s judgment. Can the property be sold to satisfy the debtor’s debt?

Answer 39

Yes, but buyer receives a lien up to the amount of consideration paid.

Question 40

A creditor may avoid a voluntary transfer of a debtor’s property if the creditor holds a ____________________ claim at the time of the transfer, and if ____________________ .

Answer 40

Liquidated; the debtor was insolvent prior to the transfer or became insolvent as a result of the transfer.

Question 41

A mechanic’s lien is a ____________________ remedy to give security to those adding value to ____________________ property.

Answer 41

statutory; real property

Question 42

To perfect a mechanic’s lien, a general contractor must file a memorandum of mechanic’s lien in the clerk’s office within ____________________ of ____________________ .

Answer 42

90 days; the completion or termination of the work

Question 43

If a contractor files one mechanic’s lien for work performed on several pieces of property (all covered by one contract): to apportion costs among the different properties, is the lien valid?

Answer 43

The lien is valid but only if it apportions the costs of labor and materials among the different properties, to the extent that apportionment is possible.

Question 44

A repairer’s lien allows a mechanic to retain property until:

Answer 44

The owner pays the just and reasonable charges for the repair.

Question 45

Under what circumstances does a repairer’s lien have priority over competing article 9 security interests?

Answer 45

If the repair was made in the ordinary course of business and the property remains in the repairer’s possession.

Question 46

How does a security interest attach to collateral?

Answer 46

I) parties must agree that security interest ataches (evidenced by authentication)
II) value must be given by the secured party
III) debtor must have rights in the collateral

Question 47

To achieve its maximum priority over other creditors, a security interest must be perfected. How a security interest in equipment perfected?

Answer 47

By filing with state corporation commission (scc) a financing statement containing the names and mailing addresses of both parties and indicating the collateral. Debtor must authorize by signing or authentications

OR

By creditor taking possession

Question 48

In VA How is a valid possessory lien created in equipment?

Answer 48

Where a mechanic repairs an item of PP on request and is not paid for the services provided. When repair is made at the owners request, mechanic is entitled to just and reasonable charges of his services.

Possessory liens have priority over any security interest in collateral as long as 1) goods or services were provided in the ordinary course of business and II) the collateral remains in the lien holders possession.

Question 49

When is a principle bound by the act of an agent?

Answer 49

If agent has actual or apparent authority.

Actual authority is authority that the agent reasonably believes that she possesses based on te principles dealings with him.

Apparent authority, same as above except swap “third party” for “agent”

Question 50

If a signature is unauthorized, a principle may still be liable on the instrument if——

Answer 50

She ratifies the signature.
Ratification occurs when a principal knowingly adopts a signature as her own( with full knowledge of the circumstances) OR when she appropriates the benefit of the unauthorized signing (kept and used furniture in hypo)

Question 51

When are guarantor’s discharged from liability?

Answer 51

if the creditor fails to perfect its security interest in the collateral. because failing to perfect a security interest impairs the value of collateral.

Question 52

When does a “guarantor of collection” become liable on an instrument?

Answer 52

only if

1) execution of judgment against creditor is returned unsatisfied
2) the debtor is insolvent
3) otherwise useless to proceed against debtor

Cannot be sued until full efforts of collection are taken against debtor

Question 53

What are the defenses to a mechanics lien?

Answer 53

Statute of Limitations (later of 6 months after completion of work or, 60 days after filing)

Blanket Lien Defense - lump sum - did not distribute charges and materials proportional to each lot

Release of 1 Lot Defense - creditor who releases the lien on one lot is estopped from enforcing the lien against the remaining lots.

Question 54

How does one get a mechanics lien?

Answer 54

Generally, all persons PERFORMING LABOR OR FURNISHING MATERIALS valued at $150 or more for the construction, removal or repair or improvement of any BUILDING OR PERMANENT STRUCTURE has a lien for the VALUE OF THEIR SERVICES.

Question 55

How does a general contractor perfect a mechanics lien in Virginia?

Answer 55

1) File memo of mechanics lien with Clerk of court
2) within 90 days of the completion of the work OR from the time work was terminated
3) memo must have names of the parties, verified amount of the claim and description of the property.
4) contractor must also file a certification that he has mailed a copy of the memo to the affected owner’s last address

Question 56

What is the purpose of a “debtor interrogatory”?

Answer 56

to determine NATURE, LOCATION, and PRESENT CONDITION of ALL debtor’s assets.

Question 57

How is a “debtor interrogatory” carried out?

Answer 57

1) Creditor must secure a LIVE WRIT OF EXECUTION,
2) obtain a date for the proceedings from the trial judge or commissioner, and
3) have the clerk issue an INTEROGATORY SUMMONS against debtor

Question 58

What is the difference between an EXISTING CREDITOR, and a SUBSEQUENT CREDITOR?

Answer 58

EC can attack the conveyance from the debtor regardless of the nature of conveyance.

SC can only attack conveyances made with fradulent intent.

Question 59

How do you prove a quasi contract existed in Unjust Enrichment cases?

Answer 59

1) The D received a benefit conferred by the P
2) D knew he was receiving the benefit
3) retention of the benefit by the D is inequitable without paying for it.

Question 60

What are the elements to prove FRAUDULENT CONVEYANCE?

Answer 60

Must prove by Clear & Convincing Evidence:

1) D intended to defraud
2) 3P did not pay valuable consideration OR knew of D’s fraud

Question 61

What are the elements to prove VOLUNTARY CONVEYANCE?

Answer 61

Must prove by Clear & Convincing Evidence:

1) 3P did not pay valuable consideration
2) bank must prove that it was a creditor PRIOR to the conveyance
3) D was insolvent or was made insolvent when he made the transfer

Question 62

What are the elements to prove CONSTRUCTIVE TRUST?

Answer 62

Must prove by Clear & Convincing Evidence:

1) 3P was unjustly enriched
2) 3P is NOT a BFP
3) 3P Received benefits fraudulently
4) In balance of equity bank is more harmed than 3P

Question 63

What type of procedure does a general creditor bring to attack fradulent conveyance or voluntary transfer?

Answer 63

CREDITOR’S BILL IN EQUITY

Question 64

What type of procedure does a judgment creditor bring to attack fradulent conveyance or voluntary transfer?

Answer 64

Motion to Set Aside Transfer