Neal v. Sec’y of the Dep’t of Veterans Affairs, Record No. 1219-22-4 (Va. Ct. App. Oct. 24, 2023)
In this nuanced opinion, the Court of Appeals explores the role that title may play in an unlawful detainer action.
Facts. Gloria Neal owned a home subject to a deed of trust. The deed was secured by a loan that was guaranteed by the VA. Neal fell into default and the VA obtained a foreclosure deed through a non-judicial foreclosure sale. When Neal refused to leave the property, the VA filed an unlawful detainer suit.
Neal admitted that she was in default but answered the suit with an affirmative averment that due to the VA’s constructive fraud, the foreclosure deed was “defective and void, alternatively voidable.” Neal alleged that the deed of trust had a rider that required compliance with all VA regulations. Later, when she obtained a loan modification, a VA representative told her that she no longer had a “VA loan.” This led Neal to believe that she did not have the protection of certain VA regulations relating to foreclosures. She alleged that if she knew that “she had the benefits of a VA loan, she would have sought help from the VA to stop the foreclosure.”
The VA filed for summary judgment, arguing that there was no dispute of material fact and that they were entitled to a writ of possession as a matter of law because even if Neal’s averments were true, a foreclosure deed can only be voided through a counterclaim, third-party claim, or affirmative complaint requesting that the court set the deed aside. Neal responded that the facts in her averment were in dispute, and if proved, would defeat the VA’s claim.
The circuit court held that an affirmative defense was not a proper method for challenging the VA’s title and granted it a writ of possession. Neal appealed.
Issue. Whether an affirmative defense contesting he validity of a plaintiff’s title is permissible in an unlawful detainer case.
Holding. Yes. In an unlawful detainer proceeding, an affirmative defense is permissible to contest the validity of a plaintiff’s title if the plaintiff’s right of possession is derivative of the contested title.
Notes. The court’s holding turns on the nature of an unlawful detainer action. The “sole issue” to be determined in that action is who has a superior right of possession. To prove her right, a plaintiff must show either “prior actual possession, which was then yielded to the defendant under some temporary or defeasible estate that has ended,” or “a right of possession acquired after the defendant’s entry.” Though a plaintiff’s right of possession does not always turn on a question of title, “when the plaintiff’s after -acquired right of possession is based on a claim of title, the plaintiff may be required to establish the validity of that title.”
Here, the VA’s right of possession was derived “wholly” from its title, therefore it was required to prove the validity of that title. In other words, Neal contested the validity of the VA’s title, thus the VA had to prove the validity of its title to prevail in its unlawful determiner action. Neal pled sufficient facts to establish constructive fraud, for which a foreclosure sale may be set aside, therefore there was a genuine dispute over issues of material fact that precluded summary judgment.
Importantly, if the VA’s title is proved invalid, the circuit court cannot go on to set aside the title—that can only be done in a separate proceeding. Rather, if the VA’s title is proved invalid, it can only establish Neal’s superior claim of possession for purposes of the unlawful detainer case.