River Place North Housing Corp. v. American Landmark Equity Corp. ( 1995 )

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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