PRESENT: All the Justices 

VIRGINIA HOUSING DEVELOPMENT AUTHORITY 

v. Record No. 970924 

FOX RUN LIMITED PARTNERSHIP 

 OPINION BY 

 JUSTICE LAWRENCE L. KOONTZ, JR. 

 February 27, 1998 

STUART A. SIMON, TRUSTEE 

v. Record No. 970946 

FOX RUN LIMITED PARTNERSHIP 

FROM THE CIRCUIT COURT OF ROANOKE COUNTY 

Kenneth E. Trabue, Judge 

 These two appeals arise from a foreclosure sale of a multifamily housing project. In the first appeal, we consider 

whether the noteholder and purchaser at that sale is entitled to 

collect the “prepayment fee” provided for by the terms of the 

notes secured by the deed of trust. The second issue we 

consider, raised in both appeals, is whether the advertisement 

of the foreclosure sale by the trustee adequately disclosed that 

certain personal property, also encumbered by the deed of trust, 

was to be sold along with the real property. 

BACKGROUND

 The parties do not dispute the principal facts. On 

November 23, 1987, the Virginia Housing Development Authority 

(VHDA) made a loan, evidenced by three notes in the total amount 
of $11,737,000, to Fox Run Limited Partnership (Fox Run) to 

finance the acquisition of land and the construction thereon of 

a 274-unit multi-family housing project in Prince William 

County. Additionally, the acquisition of certain items of 

personalty, generally consisting of appliances for individual 

units, was also financed by the loan. 

 The three notes, secured by a single deed of trust, are 

identical in their terms. Relevant to this appeal, each note 

provides as follows: 

 D. Upon failure of [Fox Run] to perform or comply 

with any of the terms or conditions of this Note or 

upon the occurrence of any event of default under the 

Deed of Trust hereafter described securing this Note, 

the entire unpaid principal hereof, together with all 

accrued interest thereon, shall, at the option of 

[VHDA], become at once due and payable (and no failure 

by [VHDA] to exercise such option shall be deemed or 

construed as a waiver of the right to exercise the 

same in the event of any subsequent or continuing 

default or breach). 

. . . . 

 F. . . . In the event that [VHDA] shall exercise 

its right under Section D hereinabove . . ., a 

prepayment fee shall, at the option of [VHDA], become 

at once due and payable . . . . Any prepayment fee 

which shall become due and payable under this Section 

F shall be secured by the Deed of Trust . . . .[ ]1

 1

This section provides for alternate calculations to 

determine the amount of the prepayment fee. However, for 

purposes of this appeal the parties agree that the fee is six 

percent of the outstanding balance of the loan, which amounts to 

$698,104.59. 

2
 In addition to the real property, the deed of trust 

describes the property encumbered thereby as “equipment and 

fixtures . . . and all items of personal property . . . now or 

hereafter used on or in connection with the Development.” 

(Emphasis added.) It further provides that “[t]he Secured 

Indebtednesses consist of . . . [a]ll obligations under three 

certain deed of trust notes of even date . . . [and] [a]ll other 

indebtednesses of [Fox Run] to [VHDA].” (Emphasis added.) 

 The deed of trust provides that upon default, as defined 

therein, acceleration of “all of the Secured Indebtednesses 

shall, at the option of [VHDA], become at once due and payable” 

and provides for the sale of all secured property by the trustee 

to satisfy the debt. The deed of trust also contains waivers of 

delay and notice: 

No delay by [VHDA] or the Trustees in exercising 

any right or remedy hereunder or otherwise afforded by 

law shall operate as a waiver thereof or preclude the 

exercise thereof during the continuance of any default 

hereunder. 

 . . . . 

Unless required by law, notice of the exercise of 

any option granted to [VHDA] herein need not be given, 

and [Fox Run] hereby waives, to the extent permitted 

by law, any notice of the election of [VHDA] to 

exercise any such option. 

 On December 4, 1991, following default by Fox Run on the 

notes, VHDA gave notice by letter to Fox Run of its election to 

exercise its right of acceleration under the notes and the deed 

3
of trust, declaring the entire principal, accrued interest and 

late charges to be immediately due and payable. While not 

addressing the prepayment fee, VHDA expressly reserved its right 

to “any remedies . . . at law [or] in equity, under the Notes 

[and] the Deed of Trust.” 

 Fox Run filed a bankruptcy petition on December 10, 1991, 

staying any effort at foreclosure by VHDA. On November 6, 1992, 

the bankruptcy court terminated the automatic stay, and, on 

December 10, 1992, VHDA again informed Fox Run that it had 

exercised its option to accelerate the debt. Again, there was 

no express mention of the prepayment fee in this notice, but the 

same reservation of remedies was made. 

 Fox Run and VHDA entered into negotiations in an effort to 

restructure the loan and cure the default. When the 

negotiations failed, VHDA directed Stuart A. Simon, the 

substitute trustee under the deed of trust (the trustee), to 

institute foreclosure proceedings. The trustee notified Fox Run 

on May 26, 1993 that the foreclosure sale would be held on June 

18, 1993. The published advertisement of the sale stated that 

the trustee would “offer for sale . . . all of the property with 

any improvements thereon . . . . Reference is made to the 

. . . Deed of Trust for a more particular description.” The 

notice further provided that “[t]he Real Property shall be 

4
conveyed by special warranty deed and the Personal Property 

shall be conveyed by Bill of Sale.” (Emphasis added.) 

Fox Run then began considering the possibility of paying 

off the loan or of bidding on the property at the foreclosure 

sale, and requested that VHDA supply it with the payoff terms. 

In response to this request, VHDA calculated the balance due on 

the notes to be $13,576,596.85, including a 6% prepayment fee of 

$698,104.59. These figures, setting out the amount of the 

principal, interest, late charges, legal fees and the prepayment 

fee in express terms, were communicated to Fox Run by letter on 

June 11, 1993. 

By letter dated June 16, 1993 and delivered via 

telefacsimile, Fox Run notified VHDA of the “contingency” that 

Fox Run might submit a bid at the foreclosure sale, and asked 

VHDA to confirm that “[n]o prepayment penalty will be required 

by the foreclosure.” Fox Run further asked VHDA to confirm 

“[t]he amount required by VHDA to discharge its indebtedness in 

full,” setting out the amount of principal and interest, but 

excluding the prepayment fee, late charges, and legal fees which 

had been previously supplied by VHDA. 

On the same day, VHDA responded to Fox Run. It confirmed 

the amount of principal and interest owed, and expressly noted 

that late charges, legal fees, and costs incident to the sale 

had not been included in Fox Run’s inquiry, referring Fox Run to 

5
the June 11, 1993 letter. With respect to the prepayment fee, 

VHDA stated “[t]he deed of trust notes representing the 

outstanding debt clearly provide that a prepayment [fee] may be 

required upon acceleration by [VHDA]. However, this is not to 

say that [VHDA] will necessarily include, in any bid it may put 

forward, all or any part of the prepayment [fee].” 

VHDA, in expectation that Fox Run would have funds 

available in its reserve accounts to pay a possible deficiency 

resulting from foreclosure, initially prepared its foreclosure 

bid without including the full prepayment fee. However, after 

reviewing this bid on the morning of the sale, VHDA decided to 

increase its bid to include the full amount it had calculated 

was due, including the prepayment fee. VHDA was the sole bidder 

at the foreclosure sale, submitting a bid of $13,670,000, the 

amount VHDA had calculated was the whole indebtedness including 

the prepayment fee.2

On August 16, 1993, Fox Run informed VHDA that it claimed 

ownership of certain “personal property remaining on the 

premises, including appliances and other items,” and submitted 

 2

The parties do not dispute that VHDA failed to consider 

certain credits due Fox Run for its reserve accounts or that 

there was a slight deficiency between VHDA’s bid and the actual 

amount due under VHDA’s calculations. Accordingly, following 

the sale VHDA determined that Fox Run was due $110,136.85 from 

the sale after all debts and fees were satisfied, and paid that 

sum to Fox Run. 

6
an inventory of those items.3 On August 25, 1993, VHDA responded 

that the personal property “was transferred [to VHDA] by the 

trustee as part of the trustee’s sale.” After Fox Run disputed 

VHDA’s ownership of the personal property located on the 

premises, VHDA provided Fox Run with a copy of the bill of sale 

which transferred to VHDA “all right title and interest to the 

personal property.” 

On August 27, 1993, Fox Run filed a motion for declaratory 

judgment against VHDA and the trustee asserting that VHDA is not 

entitled to the prepayment fee because VHDA “has not properly 

exercised its option to impose a prepayment [fee] or done so in 

a timely manner.” Thus, the pleading asserts that the sale 

price of the property at foreclosure exceeded the indebtedness 

secured by the lien of the deed of trust by the amount of the 

prepayment fee. Continuing, the pleading further asserts that 

the trustee had not “properly sold” the personal property 

belonging to Fox Run. Accordingly, Fox Run sought a declaratory 

judgment that VHDA is not entitled to the prepayment fee, 

creating an excess from the foreclosure sale in that amount in 

 3

The personal property consisted generally of appliances 

such as stoves, refrigerators, washers, and dryers used in the 

individual apartments. The parties do not dispute that certain 

other appliances used at Fox Run were the property of Fralin & 

Waldron, the developer that had formed the Fox Run Partnership. 

Fralin & Waldron was permitted to remove its appliances 

following the foreclosure sale. 

7
Fox Run’s favor, and that title to the personal property remains 

vested in Fox Run.4

VHDA and the trustee responded to the suit with general 

denials. Extensive discovery proceedings followed, with agents 

and employees of the parties being deposed. 

 Nina B. Nolley, a VHDA employee, testified at her 

deposition that the prepayment fee had not been calculated until 

Fox Run requested payoff figures on June 9, 1993. She further 

testified, however, that the prepayment fee “always existed in 

the [loan] documents,” and that she always included prepayment 

fees in her loan calculations if one was provided for in the 

loan documents. Nolley testified that in every instance that 

she could recall, VHDA assessed a prepayment fee for any payoff 

that was subject to such a fee. 

 J. Judson McKellar, Jr., General Counsel for VHDA, and Paul 

M. Brennan, Senior Counsel for VHDA, both testified that 

following Fox Run’s request for payoff figures, McKellar, whose 

responsibilities at VHDA included such matters, determined that 

the prepayment fee would be included as part of Fox Run’s debt. 

According to McKellar, the decision to impose the prepayment fee 

was “a group decision . . . involv[ing] Hunter Jacobs [Deputy 

 4

A further claim concerning pre-foreclosure rents was 

settled by the parties and is not a part of this appeal. 

8
Director of Housing Management], Paul Brennan, myself . . . Nina 

Nolley . . . [and] . . . later . . . Conrad Sterrett.” 

 Sterrett, the Director of Finance for VHDA, actually 

prepared VHDA’s foreclosure bid. He testified that in 

discussing the matter within VHDA, the prepayment fee “was owed 

us and therefore should be included in the maximum amount owed 

us.” This, Sterrett testified, was the “[g]eneral philosophy of 

the finance division” of the VHDA. 

 The parties submitted the case to the chancellor on the 

depositions, stipulations of fact, and cross-motions for summary 

judgment. Following review of the evidence and upon written and 

oral argument of the parties, the chancellor issued a letter 

opinion. In that opinion, the chancellor found that “the 

evidence fails to establish that prior to foreclosure at auction 

that VHDA or anyone with the authority to do so . . . [made] an 

election to impose [the prepayment fee].” The chancellor 

further found that “[t]he Trustee did not advertise that any 

personal property of Fox Run located on the premises was to be 

subject to the foreclosure sale. . . . [N]o one (neither the 

parties nor interested outside bidders) had a clue from the 

newspaper advertisement as to what freestanding appliances or 

personalty in the apartment units was owned by Fox Run.” Based 

upon these findings, the chancellor granted summary judgment for 

Fox Run, awarding it $698,104.59 as the excess of the 

9
foreclosure sale proceeds without the prepayment fee and 

$113,921.28 for the conversion of the personal property. We 

awarded appeals to both VHDA and the trustee.5

DISCUSSION

 VHDA contends that the chancellor erred in finding that 

prior to foreclosure it had not made an election to impose the 

prepayment fee. We agree. The evidence showed that McKellar, 

an officer of VHDA authorized to make such determinations, in 

consultation with other officers and employees made the election 

to exercise VHDA’s option to assess the prepayment fee as part 

of “the maximum amount owed” by Fox Run, and not merely as a 

condition of avoiding foreclosure by prepayment.6 Following that 

determination, Nolley calculated the exact amount of the 

prepayment fee and this figure was communicated to Fox Run in 

 5

We also accepted assignments of cross-error by Fox Run 

related to rulings by the chancellor on its claim for prejudgment interest. Our resolution of the main issues of these 

appeals renders the assignments of cross-error moot. 

6

Since the notes precluded Fox Run from making payoff prior 

to ten years and four months after the first unit was rented, 

VHDA further contends that its election to assess the prepayment 

fee was clearly applicable to the debt to be collected by 

foreclosure. While the notes contain this limitation, it is 

apparent from the record that VHDA and Fox Run had entered into 

negotiations to restructure or compromise the debt after default 

and that the amount of the prepayment fee could have been 

included in such a negotiated payoff. 

10
the June 11, 1993 letter.7 At that time, VHDA clearly had 

elected to exercise its option to assess the fee as part of Fox 

Run’s debt prior to foreclosure. 

 The fact that VHDA subsequently advised Fox Run that VHDA’s 

foreclosure bid might not include the prepayment fee, and that 

VHDA initially had determined that it would include only a 

portion of the fee in its bid, is not relevant. VHDA was under 

no obligation to bid the full amount of the debt at the 

foreclosure sale, especially if, in its estimation, the debtor 

had assets that could satisfy any deficit remaining after the 

sale. 

 However, the determination that VHDA had elected to 

exercise its option to assess the prepayment fee does not 

resolve the dispositive issue presented by this appeal. This is 

so because that determination leaves unanswered the contention 

of Fox Run, as originally asserted in the motion for declaratory 

judgment, that VHDA’s election was not “properly exercised 

. . . or done so in a timely manner.” Therefore, we will assume 

that the chancellor’s ruling contemplated that VHDA had not 

 7

Fox Run concedes that the June 11, 1993 letter placed it on 

notice that VHDA would impose the prepayment fee as a condition 

or penalty of Fox Run’s paying off the debt to avoid 

foreclosure. For purposes of this opinion, we will assume 

without deciding that neither VHDA’s June 11, 1993 letter, nor 

its June 16, 1993 letter, was adequate notice of VHDA’s intent 

to assess the prepayment penalty as a cost of foreclosure. 

11
properly exercised its election because it had not notified Fox 

Run of that election with respect to foreclosure. Thus, we must 

consider what duty, if any, VHDA owed under the notes or the 

deed of trust to give Fox Run notice of VHDA’s intent to assess 

the prepayment fee as part of the debt to be collected by 

foreclosure. 

 We begin by noting that deeds of trust and their underlying 

notes are “separate and distinct” documents. Jim Carpenter 

Company v. Potts, 255 Va. 147, 156 n.5, ___ S.E.2d ___, ___ n.5 

(1998). However, in appropriate circumstances, we have 

recognized that “notes and contemporaneous written agreements 

executed as part of the same transaction will be construed 

together as forming one contract.” Richmond Postal Credit Union 

v. Booker, 170 Va. 129, 134, 195 S.E. 663, 665 (1938)(citation 

omitted). So long as neither document varies or contradicts the 

terms of the other, terms of one document which clearly 

contemplate the application of terms in the other may be viewed 

together as representing the complete agreement of the parties. 

Id. Such is the case with respect to the notes and deed of 

trust at issue here, and, accordingly, we will construe these 

documents as representing one contract. 

 Nothing contained within the express language of the notes 

or the deed of trust requires VHDA to provide notice to Fox Run 

of its election to impose the prepayment fee at foreclosure. 

12
Fox Run contends, however, that in order for VHDA to exercise 

its option to assess the prepayment fee as part of the debt to 

be collected at foreclosure, that election must have been 

included in the notices of acceleration or given within a 

reasonable time thereafter.8 Relying, in part, upon our decision 

in Florence v. Friedlander, 209 Va. 520, 523, 165 S.E.2d 388, 

391 (1969), Fox Run correctly points out that a notice of 

acceleration must be clear and unequivocal that the creditor is 

exercising its option to accelerate. Thus, under the 

circumstances of the present case, Fox Run asserts that VHDA was 

required, but failed, to give Fox Run notice in clear and 

unequivocal terms in the notice of acceleration that the fee 

would be imposed at foreclosure. We disagree. 

 While it is true that the notes and the deed of trust 

expressly provide for the prepayment fee to be included in the 

indebtedness secured by the deed of trust, this does not make 

the prepayment fee a part of the principal and interest subject 

 8

With respect to the question of timeliness, Fox Run asserts 

that VHDA’s actions should be judged from the time of the first 

notice of acceleration immediately prior to Fox Run’s filing of 

its bankruptcy petition in 1991. We disagree. Having filed for 

bankruptcy and received the benefit of the automatic stay 

imposed on the foreclosure action, Fox Run cannot now assert 

VHDA was nonetheless required to continue actively to pursue the 

foreclosure during that stay, other than through the normal 

procedures of the bankruptcy court. Moreover, our resolution of 

the notice issue renders any issue of timeliness moot. 

13
to notice of acceleration. To the contrary, it is clear that 

acceleration of the principal debt is a condition precedent to 

VHDA’s ability to exercise its option to assess the prepayment 

fee following a default. Accordingly, we hold that VHDA was not 

required to include notice of its election to assess the 

prepayment fee as a part of the debt owed upon notice of 

acceleration of the principal debt. 

 We are left to consider then whether notice of VHDA’s 

election to assess the prepayment fee as part of the debt to be 

collected at foreclosure was an independent requirement fairly 

implied in the contract represented by the notes and the deed of 

trust. The deed of trust contains express provisions for waiver 

of “notice of any option granted [VHDA] herein” and that “[n]o 

delay by [VHDA] in exercising any right or remedy hereunder 

. . . shall operate as a waiver thereof or preclude the exercise 

thereof.” Fox Run asserts that the use of the terms “herein” 

and “hereunder” limits the application of these two provisions 

to options exercised under the deed of trust, and, thus, 

implicitly requires timely notice for options exercised under 

the notes. We disagree. 

 As we have noted above, the notes and the deed of trust 

represent a single contract. Since there is no express 

provision within the notes requiring notice of VHDA’s election 

to assess the prepayment fee, the waiver and delay provisions of 

14
the deed of trust may be applied to the notes without varying or 

contradicting any terms therein. Richmond Postal Credit Union, 

170 Va. at 134, 195 S.E. at 665. Thus, we hold that Fox Run 

waived the right to notice of VHDA’s election to assess the fee 

as part of the debt to be collected at foreclosure. 

 We now turn to the issue of the adequacy of the trustee’s 

advertisement of sale with regard to the personal property. 

Code § 55-59.3 provides the required contents for an 

advertisement of a sale under a deed of trust: 

The advertisement of sale under any deed of trust, in 

addition to such other matters as may be required by 

such deed of trust or by the trustee, in his 

discretion, shall set forth a description of the 

property to be sold, which description need not be as 

extensive as that contained in the deed of trust, and 

shall identify the property by street address, if any, 

or, if none, shall give the general location of the 

property with reference to streets, routes, or known 

landmarks. Where available, tax map identification 

may be used but is not required. The advertisement 

shall also include the time, place and terms of sale 

and shall give the name or names of the trustee or 

trustees. It shall set forth the name, address and 

telephone number of such person (either a trustee or 

the party secured or his agent or attorney) as may be 

able to respond to inquiries concerning the sale. 

 We have not previously addressed the application of this 

statute. Fox Run relies upon our decision in Deep v. Rose, 234 

Va. 631, 636, 364 S.E.2d 228, 231 (1988), wherein we held that 

the time periods for advertising foreclosure sales contained in 

Code § 55-59.2 are mandatory. Relying on this holding, Fox Run 

15
asserts that the same principle should apply to the content of 

the advertisement. We disagree. 

 In Deep v. Rose, we expressly stated that our holding was 

limited to the effect of Code § 55-59.2. 234 Va. at 638, 364 

S.E.2d at 232. In other matters concerning advertisement of 

foreclosure sales under deeds of trust, we have held that 

substantial compliance is sufficient so long as the rights of 

the parties are not affected in any material way. See, e.g., 

Bailey v. Pioneer Federal Savings and Loan Association, 210 Va. 

558, 562-63, 172 S.E.2d 730, 734 (1970). 

 Here, the notes and deed of trust clearly make reference to 

the real and personal property as the collateral for the loan. 

The advertisement refers to the deed of trust for a description 

of the property to be sold and expressly states that the 

personal property will be conveyed by bill of sale. This was 

adequate notice to Fox Run, and to any potential third-party 

bidder, that the personal property “used on or in connection 

with” Fox Run’s housing project would be sold as part of the 

foreclosure. Accordingly, we hold that the trustee’s 

advertisement of the sale substantially complied with the 

requirements of Code § 55-59.3. 

 For these reasons, we will reverse the judgment of the 

chancellor and enter final judgment for VHDA and the trustee. 

Reversed and final judgment. 

16