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From Banking and Finance Law Daily, April 24, 2015

Homeowners association holds valid lien for delinquent assessments; collection law applies

By Thomas G. Wolfe, J.D.

While a homeowners association in a planned community asserted a valid, “consensual” common-law lien against the real property of homeowners for unpaid association assessments, attorney’s fees, and costs, the homeowners association was subject to the debt-collection provisions of the West Virginia Consumer Credit and Protection Act, the Supreme Court of Appeals for West Virginia has held (Fleet v. Webber Springs Owners Association, Inc., April 23, 2015, Davis, J.).

In remanding the case to the state trial court for further disposition, the West Virginia Supreme Court affirmed in part and reversed in part the summary judgment entered by the lower court in favor of the homeowners association.

Background. According to the court’s opinion, Webber Springs Owners Association, Inc. (Webber Springs) elected to be a West Virginia Limited Expense Liability Planned Community (LELPC). In keeping with West Virginia law concerning LELPCs, Webber Springs’ assessments were capped. Further, Webber Springs recorded a declaration that “delinquent unpaid assessments are both liens against the real estate and the personal obligation” of the homeowners in the planned community.

In 2011, after certain homeowners were deemed to be several years delinquent on payment of their assessments to the homeowners association, Webber Springs recorded “notices of liens” with the applicable county recorder; the notices purported to “create liens for the unpaid assessments, attorney’s fees, and costs, on the real property” owned by the homeowners.

Complaint. In January 2012, the Webber Springs homeowners association filed separate complaints against three homeowners who were delinquent on paying their assessments. In response, the homeowners filed their respective answers to the complaint and asserted counterclaims against Webber Springs for alleged violations of the debt-collection provisions of the West Virginia Consumer Credit and Protection Act (WVCCPA).

Procedural context. Eventually, the various defendant homeowners sought, and were granted, consolidation of their cases. In addition, the homeowners sought to amend their counterclaims to include proposed class-action theories of recovery.

Upon the plaintiff Weber Springs’ request for partial summary judgment in its favor on the homeowners’ counterclaims, the state trial court granted the homeowners association’s request as to all of the homeowners’ counterclaims. The Supreme Court of Appeals of West Virginia granted the homeowners’ petition to hear the appeal of that decision.

Lien issue. On appeal, the homeowners argued that the liens asserted by Webber Springs for delinquent assessments, attorney’s fees, and costs were invalid and unenforceable under West Virginia law. The West Virginia high court disagreed.

In rejecting the homeowners’ contention that the pertinent lien provision of the West Virginia statute (W. Va. Code § 38-16-202(a)) completely barred common-law liens against real property, regardless of whether the liens were consensual, the court stated that the homeowners “misconstrued the statute.” While the court acknowledged that generally, under section 38-16-202(a), a common-law lien against real property is invalid and is not recognized or enforceable in West Virginia, that provision “may not be read in isolation.” Pointing to another section of the West Virginia Code (W. Va. Code § 38-16-201), the court emphasized that, regardless of whether a lien could be considered a common-law lien, section 38-16-201(3) provided “irrefutable” support for the proposition that “W. Va. Code § 38-16-202(a) was not intended by the Legislature to affect consensual common law liens.”

Although the homeowners argued that they never truly “consented” to the lien by Webber Springs, the court dismissed that argument. The court maintained that the homeowners’ association’s lien for delinquent assessments was a valid consensual lien because, among other things, Webber Springs had recorded the pertinent declaration with the county recorder and the language contained in the respective deeds of the homeowners clearly stated that the homeowners consented to be bound by such declarations.

Consequently, the West Virginia Supreme Court expressly held that “pursuant to W. Va. Code §38-16-202(a) … and W. Va. Code §38-16-201, … which must be read and applied together, consensual common law liens against real property are valid and enforceable in West Virginia.”

Collection issue. The homeowners next contended that, even if Webber Springs held a valid consensual lien for unpaid assessments, Webber Springs did not have a common-law lien for attorney’s fees and costs. In support of their argument, the homeowners invoked provisions of the WVCCPA governing debt collection practices. The state trial court erred in ruling that the WVCCPA did not apply, the homeowners maintained.

Agreeing with the homeowners on the debt collection issue, the appellate court determined that the state trial court had “erred in granting partial summary judgment in favor of Webber Springs based upon its erroneous conclusion that the WVCCPA was not applicable. Likewise, the circuit court erred in finding that the Homeowners’ WVCCPA counterclaims are barred by the statute of limitations.”

In light of the fact that the lower court did not make any rulings “purporting to resolve the Homeowners’ specific claims under the WVCCPA, including their claim that Webber Springs is prohibited from collecting attorney’s fees and costs,” the West Virginia high court ruled that the WVCCPA did apply to the case but remanded the matter to the state trial court for a determination of the particular issues.

Concurring opinion. Justice Loughry filed a concurring opinion. Among other things, Justice Loughry conveyed that, given the “broad language of certain definitions contained within the unfair debt collection provisions of the WVCCPA, I begrudgingly concur in the majority’s decision that those provisions apply to a homeowners association’s attempts to collect delinquent assessments. However, I urge the Legislature to review the policy considerations behind the applicability of the WVCCPA to such assessments and other similar non-consumer debts.”

The case is No. 14-0637.

Attorneys: Stephen G. Skinner and Anthony J. Delligatti (Skinner Law Firm) for James Fleet, Jamila Fleet, and James Lampley. Susan R. Snowden and Jason S. Murphy (Martin & Seibert, L.C.), and Tammy Mitchell McWilliams (Trump & Trump, L.C.) for Webber Springs Owners Association, Inc. Christopher J. Regan and Jason E. Causey (Bordas & Bordas, PLLC) and Anthony J. Majestro (Powell & Majestro, PLLC) as amicus curiae for West Virginia Association for Justice.

Companies: Webber Springs Owners Association, Inc.

MainStory: TopStory ConsumerCredit DebtCollection Mortgages StateBankingLaws WestVirginiaNews

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