Creditors' Rights

Question 1

What are the requirements to perfect a mechanic’s lien in Virginia?

Answer 1

A general contractor must file a memorandum of lien in the clerk’s office within 90 days of the completion of the work or from the time work is terminated

The memorandum must set forth: (1) the names and addresses of the owners and of the claimant, (2) the verified amount of the claim (and when payment is due), (3) the date from which interest is claimed, (4) the intent to claim a lien, (5) the claimant’s license number, and (6) a description of the property

The general contractor must also file a certification that he has mailed a copy of the memorandum to the affected owner’s last known address

Question 2

Negotiable

Answer 2

To be negotiable under the UCC, an instrument must be in writing, signed by the maker/drawer, contain an unconditional promise or order, to pay a fixed amount of money, to an order or bearer, payable on the demand or at a definite time, without any additional undertaking or instruction

Question 3

Type of paper (Instrument): Check

Answer 3

A check is an order instrument which requires for there to be endorsement by the holder (e.g., signature) and transfer to the subsequent party in order to negotiate

Question 4

Due Course

Answer 4

“Due Course” requires Holder to take for value, in good faith, and without notice

Question 5

Holder

Answer 5

Is a person in possession of an instrument with the right to enforce it

The instrument must be payable to the bearer or to the person in possession and free of forgey

Question 6

Holder in Due Course

Answer 6

Is a party who took possession of an instrument for value, in good faith, and without notice that the instrument had some type of defect including whether it had been dishonored

Question 7

What is the 2 step process in determing holder in due course status?

Answer 7

1. Is the person a holder?
2. Does the person hold in due course?

Question 8

If an instrument is negotiated to an holder in due course, the holder in due course takes ____

Answer 8

Free of most defenses

Question 9

Holder in Due Course Status may be protected in a subsequent ____

Answer 9

Transferee; However, that protection will not be maintained in the case that there is fraud (Shelter rule crossover)

Question 10

“Holder” Without Holder in Due Course Status

Answer 10

In absense of any of the elements of a holder in due course, a party in possession of the instrument would simply be a holder

A holder can enforce payment of the original obligation; However, this would be subject to contractual defenses by the maker/drawer

Question 11

Maker/Drawer Specific List of Defenses

Answer 11

1. Negotiable Instrument issued without consideration
   2.

Question 12

A drawer assumes the obligation to ___

Answer 12

Pay the item according to its terms when issued

Question 13

Shelter Rule

Answer 13

The shelter rule states that a party that does not qualify for holder in due course status can assert the rights of the holder in due course as long as the party is not personally engaged in wrongdoing affecting the instrument

Question 14

Blanket Lien Defense

Question 15

The Release of One Lot Defense

Answer 15

A creditor who releases the lien on one lot is estopped from enforcing the lien against the remaining lots

EFFECT: Release of a lien on a lot, would prevent enforcement of the lien on the remaining lots even if a mechanic’s lien was properly filed

Question 16

Foreign Judgments

Steps necessary for a judgment to be properly domesticated

Answer 16

Foreign Judgments are judgments of any courts other than those of Virginia

To properly domesticate a judgment in VA, an authenticated copy of the foreign judgment must be filed in the office of the clerk of any circuit court of any city or county of the Commonwealth upon payment of the prescribed fee

The creditor must also make and file with the clerk of court an affidavit setting forth the name and last known post office address of the judgment debtor and the judgment creditor

The clerk must mail notice of the foreign judgment to the debtor at the address given by the creditor

Question 17

Can an out-of-state judgment be enforced without suit being filed, if steps are met in properly domesticating a foreign judgment?

Answer 17

Effect: Judgment would be enforceable and is treated just like a judgment obtained in VA. An out-of-state judgment can be enforced against without suit being filed in VA.

Question 18

Can a default judgment be challenged and proceedings halted, and, if so, what needs to be done to challenge it?

Answer 18

Yes, to challenge a default judgment, the debtor must show that service of process was insufficient

Question 19

Notice to Debtor

Question 20

CREDITOR’S BILL

Discovery of Assets

Answer 20

A creditor’s bill can be used for the discovery of assets and their availability for satisfaction of creditor’s claim

However, the post-judgment creditor will probably file post-judgment interrogatories to answer questions concerning unknown assets rather than proceed by the way of a creditor’s bill

Question 21

Debtor Interrogatories

What is the purpose of a “debtor interrogatory” proceeding?

How is proceeding carried out?

Answer 21

To determine the nature, location, and present condition of all of the debtor’s assets

To initiate interrogatory proceedings, the creditor must secure a live writ of execution, obtain a date for the proceedings from the trial judge or commissioner, and have the clerk issue an interrogatory summons against the debtor

Must honestly disclose information about assets, but some assets could be protected by various exemptions allowed to debtors in VA

Question 22

Consequences if debtor fails to answer or attend interrogatories?

Answer 22

Usually will result in the court/judge issuing a capias (arrest warrant) for the debtor on the grounds of contempt of court and debtor could be taken into custody until she answers

Question 23

Homestead Deed

Question 24

Creditors fall into two classifications:

Answer 24

Existing Creditors and Subsequent Creditors

Question 25

What is an Existing Creditor?

Question 26

What is a Subsequent Creditor?

Question 27

Fraudulent Conveyance

Answer 27

In Virginia, any gift, conveyance, assignment, or transfer made with the actual intent to hinder, delay, or defraud creditors is considered fraudulent

Question 28

Transfers between Spouses

Answer 28

Transfers between spouses are presumed to be fraudulent and are voidable at the suit of either existing or future creditors

This presumption of fraudulent intent can be rebutted if the spouse shows that they gave consideration for the transfer or that the transfer was a bona fide gift

Question 29

Badges of Fraud

Question 30

Potential Fraudulent Conveyances fall into two Classifications:

Answer 30

Conveyances made with intent to hinder, delay, or defraud a creditor, and Voluntary Conveyances

Question 31

Conveyance with intent to hinder, delay, or defraud a creditor may be attacked by which type of creditors?

Answer 31

May be attacked by either an existing creditor or subsequent creditor

Question 32

Voluntary Conveyance

Question 33

A voluntary conveyance may be attacked by which type of creditors?

Answer 33

May be attacked only by existing creditors

Question 34

Contract Liability of Parties

Liability of Principal

Signatures by Agents

Answer 34

A principal is liable on an instrument signed by an agent or agents

If the agent is authorized, the principal is liable whether the agent signed the principal’s name, the agent’s name, or a combination of both

Question 35

Defenses: Accommodation (Suretyship) Defenses

Answer 35

An accommodation party is a type of surety, or one who guarantees the debt of another

In order to be an accommodation party, a person cannot have received a direct benefit from the instrument