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LENDING, INC. v. UNIT OWNERS ASSOCIATION OF ANTIETAM SQUARE CONDOMINIUM, et al.



NOTICE: The opinions posted here are
subject to formal revision. If you find a typographical error or
other formal error, please notify the Supreme Court of Virginia.


LENDING, INC.

v.

UNIT OWNERS ASSOCIATION OF
ANTIETAM SQUARE CONDOMINIUM, et al.


January 12, 2001

Record No. 000590

Present: Carrico, C.J., Hassell, Keenan,
Koontz, Kinser, and Lemons, JJ., and Compton, S.J.

HOMESIDE LENDING, INC.

v.

UNIT OWNERS ASSOCIATION OF

ANTIETAM SQUARE CONDOMINIUM, ET AL.

FROM THE CIRCUIT COURT FOR PRINCE WILLIAM
COUNTY

LeRoy F. Millette, Jr., Judge


OPINION BY JUSTICE CYNTHIA D. KINSER

In this appeal, we address the question
whether, under Code ? 55-79.84(A) and (E), court costs,
attorneys’ fees, and repair expenses incurred by a
condominium unit owners’ association in instituting and
maintaining a suit to enforce liens for unpaid assessments, as
well as the fees of a special commissioner, have priority over
payment of sums remaining due on a note secured by a first deed
of trust. Because we conclude that Code ? 55-79.84(A)
establishes the priority of liens, we will reverse that part of
the judgment of the circuit court directing payment of the costs
and other reimbursements allowed under Code ? 55-79.84(E)
before payment of the note secured by the first deed of trust.

The appellee, Unit Owners Association of
Antietam Square Condominium (Association), filed a bill of
complaint pursuant to Code ? 55-79.84 to enforce memoranda
of liens and a judgment lien for unpaid condominium assessments.
The Association named as defendants the owners of record of the
residence at 2734 Bordeaux Place in Woodbridge, also known as
Unit 25-B-3 in Phase VI, Block 25 of Antietam Square Condominium
(the subject property); BancPlus Mortgage Corporation (BancPlus),
appellant’s predecessor-in-interest and the holder of a note
secured by a purchase money deed of trust on the subject
property; the trustees under that deed of trust; and a parks and
recreation association that had two judgment liens against the
subject property.

In response, BancPlus and the trustees filed an
answer, asserting that the deed of trust securing payment of the
note was a first lien against the subject property and therefore
had priority over all claims asserted by the Association.
BancPlus asked that no order be entered adverse to its interests;
that the circuit court sustain the priority of its lien as to the
subject property; and that any sale of the subject property be
made subject to the lien of BancPlus, or in the alternative, that
BancPlus be paid in full.
[1]

On motion of the Association, the court entered
a decree appointing a commissioner in chancery for the purpose of
determining, inter alia, the amounts of the liens
on the subject property and the priority of those liens. After
conducting a hearing, the commissioner filed a report, stating
that the lien of the deed of trust held by BancPlus was second
only to the lien of any outstanding real estate taxes owed on the
subject property. The commissioner in chancery further reported
that the perfected liens and judgment liens for assessments filed
by the Association were next in priority after the deed of trust.
The circuit court subsequently confirmed the report of the
commissioner in chancery and appointed a special commissioner to
sell the subject property.

A few months later, the appellant, HomeSide
Lending, Inc. (HomeSide), was substituted as a party in the place
of BancPlus since HomeSide was the current beneficiary under the
deed of trust.
[2] HomeSide had already commenced foreclosure proceedings
on the subject property because payment on the note secured by
the deed of trust was in default. Upon receipt of notice of
HomeSide’s impending foreclosure sale, the Association filed
a motion seeking a temporary restraining order to prevent
HomeSide from proceeding with the sale. HomeSide decided to
postpone (and later canceled) its scheduled foreclosure sale.
However, when HomeSide again advertised the subject property for
foreclosure, the Association renewed its motion for a temporary
restraining order, and the circuit court granted the motion. The
court enjoined HomeSide from proceeding with a foreclosure sale
on the subject property and directed that the injunction remain
in effect until the court entered a final decree in the cause and
allocated the proceeds from the prospective sale of the subject
property.

Approximately a month later, the special
commissioner of sale moved the court to accept or reject a
purchase offer for the subject property. The circuit court
approved an amended purchase offer in the amount of $43,900 and
directed that the liens and encumbrances of record on the subject
property be transferred to the sale proceeds.
[3]

Nine months later, the special commissioner of
sale filed the following proposed scheme for distributing the net
sale proceeds in the amount of $38,183.13:

1. $8,880 to the special commissioner of sale;

2. $19,463.50 to the Association for
attorney’s fees incurred in instituting and maintaining this
suit;

3. $4,010.84 to the Association for its costs
incurred in the suit;

4. $4,111.34 to the Association for repairs
undertaken in order to market the subject property; and

5. The balance of approximately $1,717.45, plus
all accrued interest, to HomeSide.

HomeSide objected to the proposed distribution.
It alleged that, as of December 31, 1999, the amount owed to
HomeSide on the note secured by the deed of trust on the subject
property was $72,038.14, exclusive of attorney’s fees and
costs. HomeSide asked the court to reject the proposed scheme of
distribution and to award HomeSide the entire sum of $38,183.13
(plus accrued interest) in partial satisfaction of its deed of
trust.

After conducting a hearing on HomeSide’s
objection, the circuit court entered a decree disbursing the sale
proceeds in accordance with the proposed scheme of distribution
filed by the special commissioner of sale. The court reasoned
that the language used in Code ? 55-79.84 "means that,
without limitation, the people who . . . brought the
suit, incurred the attorney’s fees, [and] incurred the cost
of the special commissioner are entitled to . . .
reimbursement for costs and attorney’s fees." We
awarded HomeSide this appeal.

The question on appeal is whether the circuit
court erred in approving a distribution of the sale proceeds that
gave priority to the attorney’s fees, costs, and repair
expenses incurred by the Association in instituting and
maintaining this suit and in selling the property, and also to
the fees of the special commissioner of sale, over the sums
unpaid on HomeSide’s deed of trust. We believe that the
plain meaning of the terms used in Code ? 55-79.84(A) and
(E) answer this question.
[4] Thus, in interpreting those subsections, we look no
further than the words utilized by the General Assembly. Supinger
v. Stakes
, 255 Va. 198, 205-06, 495 S.E.2d 813, 817 (1998)
(citing City of Winchester v. American Woodmark Corp., 250
Va. 451, 457, 464 S.E.2d 148, 152 (1995)). "We must
. . . assume that the legislature chose, with care, the
words it used when it enacted the relevant statute, and we are
bound by those words as we interpret the statute." Barr
v. Town & Country Properties, Inc.
, 240 Va. 292, 295, 396
S.E.2d 672, 674 (1990). "The manifest intention of the
legislature, clearly disclosed by its language, must be
applied." Anderson v. Commonwealth, 182 Va. 560, 566,
29 S.E.2d 838, 841 (1944).

Subsection (A) of Code ? 55-79.84
provides that a condominium unit owners’ association
"shall have a lien on every condominium unit for unpaid
assessments levied against that condominium unit
. . . ." That subsection further states that
any such lien,

once perfected, shall be prior to all other
liens and encumbrances except (i) real estate tax liens on that
condominium unit, (ii) liens and encumbrances recorded prior to
the recordation of the declaration, and (iii) sums unpaid on any
first mortgages or first deeds of trust recorded prior to the
perfection of said lien for assessments and securing
institutional lenders.

As applicable at the time of these events,
subsection (E) provided that "[t]he judgment or decree in an
action brought pursuant to this section shall include, without
limitation, reimbursement for costs and attorneys’ fees,
together with interest at the maximum lawful rate for the sums
secured by the lien . . . ."

Contrary to the circuit court’s holding
and the argument of the Association, subsection (E) of Code
? 55-79.84 did not establish an order of priority for the
disbursement of proceeds from the sale of the subject property.
That provision merely directed that any judgment or decree
entered in an action brought pursuant to Code ? 55-79.84 to
enforce a lien for unpaid condominium assessments must include
provisions addressing reimbursement for costs and attorneys’
fees, and also interest on the sums secured by such lien. The
additional requirement that the enumerated reimbursements be
"without limitation" did not give priority to the
payment of those reimbursements over the payment of other liens
or encumbrances. In other words, subsection (E) allowed a unit
owners’ condominium association to recover more than just
the unpaid assessments when it brought a suit to enforce its
lien, but nothing in that subsection addressed the priority of
those allowed reimbursements in relation to other liens.

Instead, the priority of liens is governed by
subsection (A) of ? 55-79.84. That provision gives the
perfected lien of a condominium unit owners’ association for
unpaid assessments priority over other liens except three
specific types of liens, the third of which is relevant to this
suit, i.e., "sums unpaid on any first mortgages or first
deeds of trust recorded prior to the perfection of said lien for
assessments." Code ? 55-79.84(A). Thus, pursuant to
that section, HomeSide’s deed of trust on the subject
property has priority over not only the lien of the Association
for unpaid assessments but also the Association’s
attorneys’ fees, costs, and interest on the sums secured by
its lien. This was the conclusion reached by the commissioner in
chancery who reported that HomeSide’s lien was second in
priority only to any outstanding real estate taxes.

Therefore, we conclude that the circuit court
erred in directing that the proceeds from the sale of the subject
property be disbursed to the Association for its attorneys’
fees, costs, and repair expenses before payment to HomeSide on
the note secured by its first deed of trust. Hence, we will
reverse that portion of the judgment of the circuit court and
remand the case to the court for entry of an order of
distribution in accordance with this opinion.

However, we will affirm the judgment of the
circuit court with respect to the fees of the special
commissioner of sale. The court appointed the special
commissioner pursuant to the provisions of Code ? 8.01-96.
In pertinent part, that section states, "In decreeing a sale
under any provisions of law, the court may . . .
appoint one or more special commissioners to make such a
sale." The amount of a special commissioner’s fees
under a decree for sale of property is fixed by statute. Under
Code ? 8.01-109, a court may allow "a commission of
five percent on amounts up to and including $100,000, and two
percent on all amounts above $100,000." That section further
specifies that, for the purposes of determining the commission,
"each piece of property so sold shall constitute a separate
sale, even though more than one piece of property is sold under
the same decree." The sale of the subject property in this
suit was a judicial sale. See Staples v. Somers,
196 Va. 581, 587-88, 84 S.E.2d 523, 526-27 (1954) (discussing
incidents of judicial sale). By fixing the amount of the
commission in a judicial sale, we believe that the General
Assembly intended that such commission be paid from the proceeds
of that sale. Cf. Code ? 8.01-618.1 (paying fee out
of fund in court to special commissioner for making report under
Code ? 8.01-617); Citizens Nat’l Bank of
Charlottesville v. Manoni
, 76 Va. 802, 808 (1882) (when
property sold under decree of sale, taxed costs properly paid
from proceeds). Thus, the circuit court properly directed payment
of the fees of the special commissioner from the sale proceeds
before any distribution of the funds to HomeSide.

For these reasons, we will affirm in part, and
reverse in part, the judgment of the circuit court and remand for
further proceedings consistent with this opinion.

Affirmed in part,

reversed in part,

and remanded.

FOOTNOTES:

[1] The owners of the subject
property, and the parks and recreation association also filed
answers. However, after the subject property was sold, the
circuit court entered a decree dismissing those parties.

[2] A substitute trustee under the
deed of trust was also named as a party to the proceedings.

[3] The circuit court also fixed the
amount of certain seller’s charges in connection with the
sale, leaving the sum of $38,183.13 as the net proceeds from the
sale of the subject property. These seller’s charges
included a real estate commission in the amount of 6% of the sale
price, the grantor’s tax, the purchaser’s costs in the
amount of 6% of the sale price, pro-rata and delinquent real
estate taxes, and a settlement attorney’s fee in the amount
of $250.

[4] The General Assembly amended Code ? 55-79.84 in
2000. Those amendments are not applicable to this suit.
Therefore, we will cite to the version of Code ? 55-79.84
in existence before the 2000 amendments.

 

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