Creditors' Rights Flashcards
What are the requirements to perfect a mechanic’s lien in Virginia?
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
Negotiable
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
Type of paper (Instrument): Check
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
Due Course
“Due Course” requires Holder to take for value, in good faith, and without notice
Holder
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
Holder in Due Course
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
What is the 2 step process in determing holder in due course status?
- Is the person a holder?
- Does the person hold in due course?
If an instrument is negotiated to an holder in due course, the holder in due course takes ____
Free of most defenses
Holder in Due Course Status may be protected in a subsequent ____
Transferee; However, that protection will not be maintained in the case that there is fraud (Shelter rule crossover)
“Holder” Without Holder in Due Course Status
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
Maker/Drawer Specific List of Defenses
- Negotiable Instrument issued without consideration
2.
A drawer assumes the obligation to ___
Pay the item according to its terms when issued
Shelter Rule
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
Blanket Lien Defense
The Release of One Lot Defense
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
Foreign Judgments
Steps necessary for a judgment to be properly domesticated
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
Can an out-of-state judgment be enforced without suit being filed, if steps are met in properly domesticating a foreign judgment?
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.
Can a default judgment be challenged and proceedings halted, and, if so, what needs to be done to challenge it?
Yes, to challenge a default judgment, the debtor must show that service of process was insufficient
Notice to Debtor
CREDITOR’S BILL
Discovery of Assets
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
Debtor Interrogatories
What is the purpose of a “debtor interrogatory” proceeding?
How is proceeding carried out?
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
Consequences if debtor fails to answer or attend interrogatories?
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
Homestead Deed
Creditors fall into two classifications:
Existing Creditors and Subsequent Creditors
What is an Existing Creditor?
What is a Subsequent Creditor?
Fraudulent Conveyance
In Virginia, any gift, conveyance, assignment, or transfer made with the actual intent to hinder, delay, or defraud creditors is considered fraudulent
Transfers between Spouses
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
Badges of Fraud
Potential Fraudulent Conveyances fall into two Classifications:
Conveyances made with intent to hinder, delay, or defraud a creditor, and Voluntary Conveyances