Abandoned Property

ISSUE: A Landlord must often deal with property seemingly abandoned by a former tenant. While the Landlord would like to dispose of or sell this abandoned property, the Landlord may not know who owns the property or if there is a recorded security interest. In some instances, the Landlord may want to sell the property to satisfy unpaid rent or transfer it to the next tenant. Before any decision can be made, the Landlord must determine whether the property is truly abandoned and whether other parties may have a legal claim to the property.

THE LAW OF FINDS: "Abandonment" according to the Law of Finds, means that the owner of the goods has voluntarily relinquished "possession with the intention of terminating his ownership and with no intention of vesting title in another."

ACTION ADVISE: If the Landlord wishes to transfer or sell the property, it should: (1) Do a complete inventory of the property by 2 witnesses; (2) Examine the property for evidence of ownership; and (3) Conduct a UCC search for recorded liens or leases.

NOTICE: The Virginia Residential Landlord and Tenant Act requires a letter to be sent to the former tenant giving a 10 day notice that unless the property is retrieved it will be considered abandoned. Normally Residential Landlords are held to a higher standard than Commercial Landlords when dealing with their tenants. Therefore, it would be appropriate to provide a 10 day notice to any person who you believe has an interest in the property, including parties with UCC claims, tenants, or names which are found on the property.

DISPOSITION: If none of these parties make a claim, the property is probably abandoned. This determination will have to be made in each situation on a case-by-case basis in conjunction with a lawyer. Non-legal factors may impact on your determination of how to dispose of the property, i.e. the value of the equipment or if it can be transferred to a new tenant in the same space. A carefully worded sale agreement of the equipment may provide some protection for the Landlord from a subsequent claimant.

The above article is not meant to replace legal counsel. If you'd like to speak to one of the attorneys at Gross & Romanick, call us at 703-273-1400 or fill out our online Information Request form.

The Statute of Frauds: It's Not What it Sounds Like (What you should put in writing)

Based on its name you might think that the Statute of Frauds has something to do with criminal or civil fraud, but it doesn't. The name "Statute of Frauds" actually refers to a law passed by the British Parliament in 1677, and the name has been retained through the centuries. It specifies which kinds of contracts must be in writing in order to be enforceable. Its purpose is to prevent the setting up of supposed agreements and then supporting them by perjury.

The most common applications of the Statute of Frauds are as follows:

* Holding a person responsible for the promise to pay the debt of another
* Contracts for the sale of real estate
* Leases for real estate over 1 year
* Agreements which cannot be performed within 1 year
* Sale of personal property over $5,000
* Sale of goods over $500, unless the buyer accepts the goods
* Agency agreements

While the Statute requires a written agreement, almost any writing sufficient to indicate some kind of agreement between the parties will suffice. However, the "writing" must be signed by the party who is being charged. Thus, the venerable Statute of Frauds is still an important and influential part of modern law.

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The above article is not meant to replace legal counsel. To speak to one of Gross & Romanick's attorneys please contact them directly by filling out their online form, email them at law@gross.com, or call (703) 273-1400.

Construction Law: Performance Bonds

Companies in the construction industry should understand performance bonds. Performance bonds differ in many ways from payment bonds. While payment bonds are designed to assure compensation to subcontractors and suppliers, performance bonds seek to secure completion of the project or award of damages to the owner for default by the general contractor.

Performance Bonds Defined

The parties to a performance bond consist of the following: (1) the principal (usually the general contractor), (2) the obligee (the owner), and (3) the surety. In some cases, a performance bond is required of a subcontractor, in which case the principal is the subcontractor and the obligee is the general contractor. Performance bonds are primarily designed to afford significant protection to the owner, while subcontractors and suppliers typically have no rights under such bonds.

Claims are brought by the obligee, when the principal has defaulted on its contract with the obligee - the obligee declares the principal to be in default and notifies the surety. Only then is surety required to act, since premature actions by the surety can result in litigation with the principal.

Actions upon Default

In the event of default by the principal, the surety has several options. It can permit the owner to finish the project and compensate the owner for damages. Or, the surety can finish the project through a new contractor. Or, it can finance the general contractor so the defaulting obligee can complete the contract. The choice depends upon the situation and the players.

Statute of Limitations

While the federal Miller Act states no specific time period within which suit must be brought against a surety, there are federal, state and local time limitations applicable to performance bonds. Virginia Code Section 11-59 requires actions against sureties on performance bonds be filed within one year after completion of the contract, including the expiration of all warranties and guarantees. If the action is for a breach of warranty or defect, then all cases must be filed within one year of discovery of the defect or breach of warranty.

Conclusion

In conclusion, individuals in the construction industry should keep in mind that the rules and principles, which govern the operation of these bonds, are sometimes peculiar to the bonds themselves and the statutes under which they are provided. Therefore, it is important to have a good understanding of the terms of your bond, any applicable statutes, your contract and the facts.

This brief article is only meant to provide a very broad overview of the complex area involving payment bonds and cannot be relied upon as a substitute for legal advise. Contact Gross & Romanick by filling out out online form, emailing us at law@gross.com, or calling (703) 273-1400 if you need information about your specific situation.

Act of God: Are You Saved?

Gross & Romanick's litigation division offers legal counsel and representation to clients across the Metro DC area. The following article about "Acts of God" is meant to provide information to its many clients--but not to replace actual representation. To seek legal counsel, please contact Gross & Romanick today via their website or by calling 703-273-1400.

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Flood, fire, and famine may be the traditional hallmarks of divine intervention, but the law has a very specific definition of what count as actions by the Almighty. Legally, "Acts of God" are "misfortunes and accidents arising from inevitable necessity which human prudence could not foresee or prevent" - in other words "bad luck." The earliest recorded use of the term "Act of God" was by Sir Edward Coke in 1581; he used the term to refer to death, and later extended it to include a sudden tempest that broke down sea walls. In 1899 the Virginia Supreme Court had the opportunity to address the Act of God question when it excused a reluctant groom from his promise to marry because the unfortunate fellow had contracted a urinary disease that was aggravated by sexual intercourse. As the blushing Court states: "I desire to speak with all reserve: but to possess the lawful means of gratifying a powerful passion, with the alternative of abstaining or periling life, is, indeed, to incur a risk of intense misery, instead of mutual comfort."

Similarly, in 1931 the Virginia Supreme Court came to a widow's aid, when it made her deceased husband's life insurance company pay. The insurance company tried to avoid the insurance contract by a provision that required prompt notice of incapacity even from a person who was too incapacitated to give any notice. The court quotes: "The primary purpose of all insurance is to insure or to provide for indemnity, and it should be remembered that, if the letter killeth, the spirit giveth life."

Most Act of God defenses involve extraordinarily violent storms, sudden tempests, severe frosts, great droughts, lightening, earthquakes, sudden death and illness. Or, a remarkable "freshet"? A railroad company successfully argued that the sweeping away of a privy with one of their employees inside was excused because a freshet with this volume of water pouring through the creek could not have been anticipated.

To successfully employ the Act of God defense, one must have been victim of a natural cause without human intervention that could not have been prevented by exercise of reasonable care and foresight. So, ironically, a devout worshiper who testified that he was trotting through his church under the Spirit of the Lord when he injured a fellow congregant was not permitted to use "Act of God" as a defense.

Should an atheist be allowed to make the Act of God argument? Maybe an agnostic judge should decide the issue.

Who Is Gross & Romanick?

Gross & Romanick, P.C. is a law firm located in Fairfax, Virginia. We provide practical solutions for our client's legal problems. The law firm built its success by being responsive to client concerns and applying hard work with integrity to find creative legal solutions. We meet our client's legal needs by using cost saving technology and combining sophistication with sensitivity. We are proud of our reputation for being knowledgeable, responsive, accessible, aggressive and professional. The law firm is led by our managing partner Edward Gross. Our attorneys are licensed in Virginia, the District of Columbia and Maryland.

A firm with great experience, Gross & Romanick is cited in Martindale-Hubbell® as having “an exemplary reputation and well established practice” with “high professional standing.” The firm received Martindale-Hubbell’s® highest ethical rating.

Our firm has extensive experience, expertise and diversity to enable us to provide our clients with a full range of legal services. We effectively and efficiently handle legal matters of all levels of complexity. Our proximity to the Fairfax County/City Courthouses and our years (since 1980) of representing litigants makes us very familiar with the practices and procedures of the courts of Northern Virginia.

Courts in which our attorneys are admitted to practice:

State Courts: Virginia, Maryland and the District of Columbia.

Federal Courts: United States Supreme Court; Court of Appeals for the 4th Circuit and the District of Columbia; U.S. District Courts for Virginia, Maryland and the District of Columbia; U.S. Bankruptcy Courts for The Eastern District of Virginia and Maryland.

We handle criminal and traffic cases in Fairfax County, Loudoun County, Arlington County, Alexandria City & Prince William County.

Would you like to contact us with respect to your legal concerns? Please fill out our Information Request Form.

Check: To Cash Or Not To Cash

You receive a check for less than the amount owed from a company. The company has stated that they owe you less than you contend is owed. Should you cash the check?

Virginia Law: In the 2002 case of Gelles & Sons General Contracting, Inc. v. Jeffrey Stack Inc., the Virginia Supreme Court for the first time interpreted Virginia Code §8.3A-311 which is a 1992 statute enacted to address the issue of cashing such checks. According to the Supreme Court opinion, the test is whether "a reasonable person" would consider the check to be a tender in full satisfaction of the claim.

Facts of Case: A general contractor ("general") and its subcontractor ("sub") dispute the amount owed by the general to the sub. The general wrote two letters to the sub setting out its position and included a check with the second letter which stated that it represented "final payment". The sub cashed the check but sued for the balance it claimed was due. The trial court found (and the Virginia Supreme Court agreed) that the letter and check was a "drop-dead letter" offer of final payment. By cashing the check, the sub could not sue for any additional sums.

Advice: If there is a question about whether a check is tendered as final payment, look at the correspondence and notations on the check to determine the intent of the maker. Cashing checks may be risky if there is some evidence for an accord and satisfaction.

For more information or to seek legal counsel for your business, contact the attorneys at Gross & Romanick today.

Guarantees - Should the Spouse Sign?

As part of its Business Law practice, the attorney's at Gross & Romanick frequently receive questions about whether or not a spouse can--or should--serve as Guarantor in a business debt. As part of their client education initiative, they've prepared the following article.

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Often, a guaranty of a debt or lease may mean the difference to the creditor between getting paid and taking a loss. The first to get paid when a business is failing are the creditors who can pursue the operators of the business. Guarantors, who are not operators of the business, have a unique incentive to pressure the business to pay.

Spouses may be particularly attractive as co-guarantors because an individual guarantor's principal asset is often a residence or some other asset owned as "tenants-by-the-entirety," which cannot be seized unless both spouses are judgment debtors. (See The Edward Gross Report, Spring 1992.) However, several recent cases indicate that enforcing guarantees against spouses may violate the Equal Credit Opportunity Act, 15 U.S.C §1691, when the guarantees were required solely on the basis of marital status. NationsBank v. Sarelson, (Fairfax Circuit Court, 1992); CMF Virginia Land, L.P. v. Edward L. Brinson, et.al., (U.S. District Court, Eastern District of Virginia, 1992). These cases indicate that creditors may have difficulty enforcing guarantees against spouses who are not parties to the contract when the applying spouse would independently qualify for credit under the creditor's standards.

In order to protect yourself, be sure to document your reasons for requiring a spouse to sign as a guarantor. Make sure that you can prove a legitimate business purpose behind your requirement, such as showing that the spouse was an owner, officer, or other active participant in the business at the time the contract was made, or, alternatively, that the spouse in the business would have been ineligible for credit without the spouse's co-guaranty. Since circumstances will often have changed, accurate documentation of your reasons at the time guaranty is executed is critical to the successful enforcement of the guaranty at any later date.

Beware! These same rules will apply to consumer debts, for which the Equal Credit Opportunity Act was originally intended.

For more information or to seek legal counsel, contact the attorneys at Gross & Romanick today.