February 2018 First Example Ten-point Answers to Virginia Essay Questions
February 2018 - QUESTION 2 – VIRGINIA BAR EXAMINATION
Chris Creditor (Creditor) was awarded judgment against Don Debtor (Debtor) in Henrico County Circuit Court on March 5, 2017, in the amount of $30,000. Debtor is unemployed, but has the following assets:
- A home in the City of Richmond that he owns with his wife, Wanda, as tenants by the entirety. The residence has a fair market value of $100,000 and is encumbered by the lien of a first deed of trust securing a note for $90,000 in favor of Bank 1.
- A bank account at Bank 2 which is titled in the names of both Debtor and Wanda. This account has a balance of $4,000.
- A 2012 Ford Taurus automobile titled in Debtor’s name. The title to the car issued by the Department of Motor Vehicles lists a lien in favor of Bank 3 which resulted from its loan to Debtor to purchase the car. The fair market value of the car is $9,000.
On July 11, 2017, Creditor took the following actions to enforce his judgment against Debtor:
- He filed an abstract of judgment in the Clerk’s Office of the Richmond Circuit Court describing the $30,000 judgment he had obtained in Henrico County Circuit Court.
- He filed separate garnishment summonses against Bank 2 and Bank 3 in Henrico County Circuit Court seeking “any sums of money in your possession to which Debtor is or may be entitled.” These summonses were properly delivered by the Clerk to the Henrico County Sheriff’s Office on July 12, 2017.
- He filed a writ of fieri facias in the Henrico County Circuit Court against the Ford Taurus. On July 12, 2017, the writ was properly delivered to the Sheriff who levied on the Taurus and towed it to the impound lot on the same day.
When the garnishment summons was received by Bank 2 on July 14, 2017, the Bank put a hold on the $4,000 in Debtor and Wanda’s account and notified them of this action. Bank 2 filed an answer with the Henrico County Circuit Court indicating that the $4,000 and any additional amounts deposited prior to the return date would be forwarded to the Court on the scheduled return date.
When the garnishment summons was received by Bank 3 on July 15, 2017, Bank 3 determined that it had no money to which Debtor was entitled, but while searching the bank records, Joe Oliver, the bank officer at Bank 3 who oversaw Debtor’s account, discovered that Debtor owed a balance of $7,500 on the loan for the Taurus. Joe could not find any evidence that Bank 3 had filed a UCC financing statement securing the car loan and hurriedly filed one in the Clerk’s office of the Richmond Circuit Court. Joe, on behalf of Bank 3, then demanded that Debtor immediately pay the balance on the car loan.
In response to Creditor’s actions to enforce his judgment and Bank 3’s demand, Debtor has made the following claims:
|(a)||Any value in the marital residence cannot be attached to satisfy the judgment because filing an abstract of judgment is not sufficient to attach a judgment lien on the residence which is in a jurisdiction other than the one in which the judgment was obtained.|
|(b)||Any value in the marital residence cannot be attached because the residence is owned as tenants by the entirety by Debtor and Wanda.|
|(d)||Any funds in the account at Bank 2 are unavailable to Creditor because Debtor and Wanda are joint owners of the account and the judgment is only against Debtor.|
|(c)||Any value in the Ford Taurus should be applied to pay off Creditor rather than Bank 3 because of Bank 3’s failure to timely record the UCC financing statement.|
Is Debtor likely to prevail on any of his claims? Explain fully.
February 2018 - QUESTION 2 – EXAMPLE ANSWER #1
(a) Debtor is not likely to prevail on his claim that filing an abstract judgment is not sufficient to attach judgment lien on the residence.
In Virginia, in order for a judgment that has been rendered in favor of a creditor to become enforceable, the creditor must file the judgment in the circuit for which it was rendered for it to be docketed. The judgment is valid and may attach a lien on the debtor's property even if located in a different jurisdiction, however the creditor must enforce through the circuit court in which the debtor's property is located. A creditor may do this through an abstract of judgment in the circuit court where the debtor's property is located. That jurisdiction may then issue a writ of execution for property of the debtor's to be seized in order to pay off the judgment.
In this case, Creditor obtained the judgment against Debtor in a different jurisdiction than where the debtor's property is located. However, he then did file an abstract of judgment in the Richmond Circuit court where the residence was located. Therefore, that judgment was docketed with the appropriate circuit court and may be enforced. The difference in jurisdiction will not affect the validity of the judgment lien against the residence.
(b) The debtor is likely to prevail on his claim that the residence is exempt from Creditor because owned as tenants by entirety with Wanda.
Virginia recognizes tenancy by the entirety which is the co-ownership of property that is reserved exclusively for married couples. In addition, marital property that is owned by both husband and wife is exempt from the claims of individual creditors. Meaning, that creditors of either only the husband or only the wife may not receive payment through a lien on property owned by both husband and wife jointly. The only creditors who may go after the marital property are creditors of the husband and wife jointly.
In this case, Creditor obtained a judgment only against Don Debtor as an individual. There is no evidence that the debt or judgment was one of marital debt. Since the residence in Richmond is owned by both Wanda and Don by tenancy by the entirety, the residence will not be subject to the individual creditor of Don.
(c) Debtor will not be likely to prevail on his claim that the funds in Bank 2 are unavailable because its owned jointly with Wanda.
In Virginia, jointly owned bank accounts may be subject to the individual creditor of one owner if the funds in that account can be reasonably separated from the funds of the other owner. If such funds can be traced to the debtor, the creditor may place a lien on that account despite the joint ownership.
In this case, the account at Bank 2 is jointly owned by wanda and debtor. However, if the funds in such account may be traceable to only Don or his contribution to the account (such as wages) can be identified, then creditor may attach a lien despite the joint ownership. Therefore, it is not necessarily true that creditor will not be able to achieve a garnishment on that account; especially if it was clear that debtor was contributing to the funds in such account.
(d) Debtor is not likely to prevail in claim that the Ford Taurus should be applied to the debt owed to creditor rather than Bank 3.
Under UCC article 9 as applied by Virginia, a purchase money security interest takes priority over a judgment lien if it attaches before the lien and is perfected. A PMSI is created when a secured party gives the debtor value in order to purchase the collateral. Perfection for consumer goods, those used for household or personal use, is automatic upon the attachment of the security interest and is also permanent. However, in Virginia there is a special requirement for cars which require that a lien be registered in the title office in which the car is registered (the Department of motor vehicles). Once a security interest is recorded on the title, then the interest is perfected.
In this case, Bank 3 gave value to the debtor in order to purchase the ford taurus. Therefore, the interest that the bank has is a PMSI and receives priority over any judgment lien if it is attached and perfected beforehand. The bank did not file a UCC financing statement on the car, however it did have its PMSI listed in the title office in which the car is registered (the DMV). Since cars require this kind of registration for an interest to be perfected, the bank's PMSI in the car is perfected regardless of the lack of the UCC financing statement. Therefore, the bank will have priority in the value of the car rather than creditor.
February 2018 - QUESTION 2 – EXAMPLE ANSWER #2
The debtor is not likely to prevail on this claim.
In the Commonwealth of Virginia, the proper way to satisfy a judgment of a Circuit Court of one jurisdiction as to real property is to file that judgment in the county of situs, or where the property is located. Typically filing a judgment in this manenr will place a lien on all of the property the debtor has in the county.
In this case, the creditor brought his valid judgment from Henrico County, to Richmond, where the real property is located. Therefore, there is a valid lien on the debtor’s property.
The debtor is unlikely to prevail because the creditor used proper procedure to obtain a lien on the debtor’s real property.
The debtor is likely to prevail on this claim.
The issue at hand is whether the actions of a single spouse can encumber property owned as tenants by the entirety.
In the Commonwealth of Virginia, property owned by tenants by the entirety may not be encumbered by a judgment against a single spouse. Available only in marriage, couples who own property by as tenants by the entirety may not encumber the property by an adverse judgement, mortgage, or other lien, or convey the property unless they do so jointly.
In this case, the facts make clear that the debtor and his wife own the property as tenants by the entirety. Moreover, there is no indication that the creditor’s judgment was against anyone but the debtor. Therefore the residence may not be encumbered by the judgment lien.
As the actions of only one spouse may not encumber property owned as tenants by the entirety, the creditor’s claim here is likely to succeed.
The debtor is likely to fail on this claim.
The issue is whether a joint bank account titled in the names of the debtor and his wife will receive the same protection as similar property owned as tenants by the entirety.
As noted above in the Commonwealth of Virginia, property owned as tenants by the entirety may not be encumbered by a judgment against a single spouse. However this protection does not extend to bank accounts in this instance. A creditor may seek satisfaction by garnishing a joint bank account. There is a rebuttable presumption that the spouses contributed to the account equally. Therefore, unless rebutted, a creditor may reach 50 percent of a bank account owned jointly with their spouse.
In this case, the bank account was titled in both the debtor and their spouse’s name. There is $4,000 in the account. Because a debtor may seek satisfaction from joint bank accounts owned by spouses and there is a rebuttable presumption that the spouses contributed equally to the account, the bank is likely to be able to collect $2,000 from the joint account. If the creditor or debtor is able rebut the presumed equal contributions, the debtor may be equal to more or less than 50 percent of the account value.
Because a creditor may reach a joint account held by spouses, to the extent of which a debtor contributed to that account, presumed to be half, the debtor is unlikely to succeed on this claim.
Any value from the Ford Taurus should first go Bank 3 as they properly perfected their security interest in the vehicle.
In the Commonwealth of Virginia, as it has adopted Article 9 of the UCC regarding secured transactions, an interest in a motor is perfected by a notation of the security interest on the car’s title.
In order to perfect a security interest in property first it must “attach” this is typically done through a creditor and debtor having a written security agreement as to the property that will act as a secured interest on a debt. Then in order to have priority over thise other than the debtor, a creditor should make sure to perfect that security interest. For tangible property this is done by filing a financing statement with the State Corporation Commission or by taking possession. Certain types of intangibles require a creditor to obtain control by arranging with the institutions which house the property (bank accounts, stock accounts). Secuiirty interests in fictures are perfected by filing with the locality where property is located.
For motor vehicles a security interest is perfected by making sure the interest is noted on the car’s title.
In this case, the facts make clear that Bank 3’s security interest in the Taurus was on the title withthe Department of Motor Vehicles. This is the proper way to perfect a security interest in a motor vehicle. The point of filing, whether with the SCC or locality, or by possession is to put later creditors on notice of the interest. Here this was accomplished by Banks 3 placing the interest on the Taurus’s title.
The bank officer’s later actions are irrelevant. But if there had been no notice of the security interest on the title, it would have been fatal to the Bank 3’s priority over the judgment creditor.
Because Bank 3’s security interest in the Taurus was properly perfected witht eh DMV, the Bank’s has priority over the judgment creditor.