Court Opinion

ID: 1060252
Source: CourtListenerOpinion
Date Created: 2013-10-09 18:43:26.30649+00
Date Added: 2024-06-11T12:37:34.958049
License: Public Domain

Present: Carrico, C.J., Compton, Stephenson, Whiting, * Lacy,
Hassell and Keenan, JJ.

RIVER PLACE NORTH HOUSING
CORPORATION
                               OPINION BY JUSTICE A. CHRISTIAN COMPTON
v.   Record No. 941963                    September 15, 1995

AMERICAN LANDMARK EQUITY CORP.

            FROM THE CIRCUIT COURT OF ARLINGTON COUNTY
                   William T. Newman, Jr., Judge

      In this case, we are dealing with a cooperative, a multi-

dwelling complex.   Under the Virginia Real Estate Cooperative

Act, Code §§ 55-424 through -506, a "cooperative" is "real estate

owned by an association, each of the members of which is

entitled, by virtue of his ownership interest in the association,

to exclusive possession of a unit."         Code § 55-426.   A

"cooperative interest" is "an ownership interest in the

association coupled with a possessory interest in a unit under a

proprietary lease."      Id.   A "proprietary lease" is "an agreement

with the association pursuant to which a proprietary lessee has a

possessory interest in a unit."       Id.

      The sole question in this appeal is whether the trial court

correctly ruled that a cooperative housing association was not

permitted to obtain a personal money judgment against a purchaser

at foreclosure for assessments of cooperative fees unpaid by the

owners of proprietary leases, which were the subject of the

foreclosure.

      *
      Justice Whiting participated in the hearing and decision of
this case prior to the effective date of his retirement on
August 12, 1995.
     The facts are undisputed.     Appellant River Place North

Housing Corporation, the plaintiff below, is the cooperative

association for the River Place North housing cooperative,

situated in Arlington County.    Abbas Ghassemi and Shawna L.

Butler were the proprietary lessees of two River Place North

cooperative units.

     In 1991, Ghassemi and Butler were delinquent in their

mortgage and cooperative fee payments.    The cooperative fees

arose from assessments made upon the proprietary lessees to pay,

inter alia, expenses of the common elements of the cooperative.

See Code § 55-471.    The mortgage lender, Monument Associates,

foreclosed its first deeds of trust on the units.    Appellee

American Landmark Equity Corporation, the defendant below,

purchased the properties at foreclosure for $120,000 each in

April 1991, and received trustee's deeds of assignment of

proprietary leases.   Each "Memorandum of Sale" described the

"property" as the proprietary lease to the unit together with the

lessee's shares of the capital stock of the plaintiff

corporation.

     In May 1993, the plaintiff filed the present action against

the defendant seeking a judgment to recover assessments on the

two units in the sums of $6,289 and $5,963.03 respectively, which

represented the delinquencies at the time defendant became the

proprietary lessee of the units.    After completion of the

plaintiff's evidence during a bench trial, the trial court

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granted the defendant's motion to strike the plaintiff's

evidence, ruling "that there is no personal liability of the

Defendant for the debt claimed by the Plaintiff."   The court did

not address a statute of frauds defense raised by defendant.    We

awarded the plaintiff an appeal from the trial court's August

1994 order entering judgment for the defendant.

     On appeal, plaintiff contends the trial court erred in

ruling that it could not obtain a personal money judgment against

the defendant for the former proprietary lessees' unpaid

assessments.   The plaintiff says the "foundation" of its motion

for judgment is Section 7.3 of its bylaws.   The section provides

that the "new Proprietary Lessee of an Apartment shall be jointly

and severally liable with the former Proprietary Lessee thereof

for all unpaid assessments against that Proprietary Lessee or his

shares which became due before the new Proprietary Lessee

acquired ownership thereof."
     Plaintiff also relies on Sections 12.1 and 12.2 of the

bylaws.   The latter section provides that every assessment

becomes a lien against the lessee's shares, "effective as of the

date such assessment is made."    The section also provides that

the lien "shall be prior to all liens and encumbrances recorded

after the effective date thereof except for any Mortgage,"

defined in the relevant documents as a first deed of trust on a

proprietary lease.   The former section, in subsections (c) and

(f), provides that the remedies set forth in the bylaws are

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cumulative and are not subject to preclusion by election of

remedies.

     Plaintiff argues the trial court "concluded that the back

assessments operated as liens on the property but did not create

a cause of action for a money judgment" against defendant.

Plaintiff contends the trial court erroneously ruled that its

sole cause of action is one to enforce the liens, not one for a

personal money judgment, and that this ruling deprives it of the

cumulative remedies afforded by the bylaws and the Virginia Real

Estate Cooperative Act (the Act).   We disagree.
     The applicable provisions of the bylaws and the Act simply

do not address foreclosure by a mortgage lender, and the

liability of the foreclosure purchaser for assessments unpaid by

the former owners of the proprietary leases foreclosed upon.

Foreclosure is not mentioned in bylaw Section 7.3 entitled

"Liability for Assessments," the "foundation" of plaintiff's

claim; in plain language, the section contemplates only a

transfer of a proprietary lease by a means other than foreclosure

by a mortgage lender.   Bylaw Section 12.1 mentions foreclosure in

subsection (f) labelled "Legal Proceedings," but speaks only to
foreclosure of the lien for assessments.   Bylaw Section 12.2

entitled "Lien for Assessments," does not mention foreclosure by

a mortgage lender.

     Code § 55-472 of the Act, relied upon by the plaintiff,

deals with remedies for nonpayment of assessments.   But the

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statute does not address foreclosure by a mortgage lender, and

recovery of unpaid assessments through a personal judgment

against the foreclosure purchaser.

     Moreover, the evidence fails to establish that the

defendant agreed to be liable personally for unpaid assessments

of the prior lessees.   Each "Memorandum of Sale," over a space

for a "Purchaser" to sign, provides:   "I further acknowledge that

this purchase is subject to the terms and conditions of the

attached Notice of Trustee's Sale and the attached

Announcements."   But neither memorandum is signed by an

individual purporting to represent defendant; handwritten on the

"Purchaser" line merely is "American Landmark Equity Corp."

Thus, even if plaintiff is correct that somehow the "subject to"

language in the memoranda would impose personal liability upon a

foreclosure purchaser who signed them, there is no evidence in

the record that a person authorized to bind defendant signed

either memorandum promising or agreeing to pay the debt.
     Finally, plaintiff relies upon In re Rosenfeld, 23 F.3d 833

(4th Cir.), cert. denied, ___ U.S. ___, 115 S. Ct. 200 (1994), a

case applying the Act but a case that is inapposite.   There the

issue was "whether a discharge in bankruptcy relieves a debtor

from personal liability for post-petition assessments of

cooperative housing dues."   Id. at 835.   Unlike the present

litigation, that case involved a cooperative's efforts to recover

delinquent assessments directly from the owner who incurred the

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debt, not from a subsequent foreclosure purchaser.

     Consequently, we hold that the trial court correctly ruled

the plaintiff was not entitled to a personal money judgment for

the delinquent assessments in issue against the defendant under

these circumstances.   Thus, the judgment in favor of the

defendant will be

                                                            Affirmed.

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