eNotes: Liability – April 2022 – Virginia

SIGNIFICANT CASE SUMMARY

VA CASE SUMMARY

California Condo. Ass’n v. Peterson
Virginia Supreme Court
No. 201349

Decided: March 17, 2022

Virginia Supreme Court clarifies standard for evidence in plea in bar hearing.

Background

Joel Steely Peterson, Jr. and his former wife owned several condominium units managed by the California Condominium Association (“the Association”). In 2006, the Association made improvements to the condominiums and assessed a pro rata share of the costs to each unit owner. Peterson and his former wife failed to pay this assessed share on two of their condominiums and the Association recorded memoranda of liens against both units in May 2006. In 2015, Peterson and his former wife divorced. In the divorce settlement, the condominiums were conveyed to Peterson. The Association became aware of this transfer and filed suit in 2017 against Peterson, seeking damages against Peterson for breaching the “Declaration Establishing a Plan for Condominium Ownership of Premises Known as California Condominium.” This Declaration included a provision requiring Peterson to pay the overdue assessments at the time the properties were conveyed to him after his divorce.

Peterson filed a plea in bar asserting that the Association’s cause of action was outside the statute of limitations for Va. Code 55.1-1966(D) (governing enforcement of condominium liens). The Association argued that its claim against Peterson did not seek to enforce a lien subject to 55.1-1966(D), but rather asserted an independent cause of actions for damages that was timely under 8.01-246 (breach of contract) due to the Declaration. At the hearing, the Association did not enter the Declaration as evidence, instead relying on the fact that it was referenced in Peterson’s Amended Complaint. At the conclusion of the hearing, the Circuit Court held that the Association’s failure to introduce the Declaration into evidence precluded the Court from deciding on the plea in bar.

Holding

The Virginia Supreme Court held that there is no need to offer evidence at an evidentiary hearing on issues that involve disputes of law concerning undisputed facts alleged in a complaint. The plea in bar is a “unique function in our adversarial system,” in that it does not solely point out legal insufficiencies, but can also “[demonstrate] their irrelevance because of some other dispositive point – usually some affirmative defense.” However, a plea in bar “can raise an affirmative defense targeting solely the allegations of the complaint, thus obviating any need for an evidentiary hearing.” The Court opined that pleas in bar can turn heavily on facts or on law, or as “an admixture of disputed facts and law.”

In this case, Peterson believed he was making a law-based argument regarding the statute of limitations. The Association did not have a witness for its argument regarding whether the Declaration created an independent cause of action, and it did not introduce the Declaration itself. The Circuit Court held that the lack of evidentiary support “doomed the Association’s argument.” However, the Declaration was included and specifically referred to in the Association’s Complaint against Peterson. Peterson himself stipulated that his plea in bar “assumed arguendo the ‘factual allegations’ in the amended complaint.” Further, his argument was not regarding the Declaration itself – its accuracy or authenticity – but was regarding its legal relevance and the statute of limitations for its supposed cause of action. Thus, “[a]n argument asserting a purely legal bar to the pleaded facts, assumed arguendo to be true, can be and should be decided in that manner.” The Virginia Supreme Court then remanded the proceedings so it could be decided whether the Declaration created an independent right of action for the conveyance.

Questions about this case can be directed to Kelly Crowe at (571) 464-0434 or kcrowe@tthlaw.com.