790 S.E.2d 623
Va.2016Background
- Portsmouth Venture One acquired a 176-acre parcel and recorded a deed of trust to Bank of America in 2004.
- The City approved creation of a Community Development Authority (CDA) and a Special Assessment Agreement with the prior owner; the CDA’s district included the parcel.
- The City/CDA docketed the ordinance abstract and a Declaration of Notice of Special Assessment in 2006; CDA bonds (~$16.24M) were issued in May 2006 to fund infrastructure and pledged to be repaid from the special assessments.
- The prior owner subdivided and sold lots; Bank of America’s notes were assigned to Cygnus VA, LLC in 2011; Cygnus foreclosed and acquired the property in 2012.
- Cygnus sued seeking (1) a declaration that the foreclosure extinguished the special-assessment lien and (2) to void or reduce assessments as exceeding peculiar benefits; the circuit court dismissed the suit with prejudice and the City/CDA prevailed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a special assessment lien is extinguished by foreclosure under a deed of trust recorded before the special assessment | Cygnus: race-notice recording rules give priority to the earlier-recorded deed of trust; foreclosure cut off the later-assessed lien | City/CDA: special assessment liens (esp. where ordinance abstract was docketed) have priority over prior liens and are enforceable against subsequent purchasers with notice | Court: Special assessment lien has priority over a previously recorded deed of trust where the ordinance/abstract was docketed and parties had notice; foreclosure did not extinguish the lien |
| Whether a later purchaser/foreclosure buyer may belatedly challenge the amount/apportionment of assessments after bonds issued and assessments agreed to by prior owner | Cygnus: assessments exceed peculiar benefits to the undeveloped lots and therefore are void or must be reduced | City/CDA: statutory scheme and bond-validation periods bar late challenges; permitting them would disrupt financing and pledge of revenues | Court: Challenge is time-barred/foreclosed by statutes protecting bond issuance and finality; plaintiff’s belated attack fails |
Key Cases Cited
- City of Richmond v. Williams & Bowe, 102 Va. 733, 47 S.E. 844 (Va. 1904) (special assessment liens can be paramount to prior liens by necessary implication)
- Schmidt & Wilson, Inc. v. Carneal, 164 Va. 412, 180 S.E. 325 (Va. 1935) (foreclosure under a prior deed of trust cuts off subsequent liens)
- Guss v. Sydney Realty Corp., 204 Va. 65, 129 S.E.2d 43 (Va. 1963) (discusses shelter doctrine protecting successors to bona fide purchasers)
- Federal Land Bank of Baltimore v. Joynes, 179 Va. 394, 18 S.E.2d 917 (Va. 1942) (successor in interest steps into prior holder’s rights)
- Andrews v. Richmond Redevelopment & Hous. Auth., 292 Va. 79, 787 S.E.2d 96 (Va. 2016) (statutory construction principles; plain meaning governs interpretation)