Specialty Hospitals v. Rappahannock Goodwill Industries ( 2012 )

Present: All the Justices
SPECIALTY HOSPITALS OF WASHINGTON, LLC
OPINION BY
v. Record No. 102196 CHIEF JUSTICE CYNTHIA D. KINSER
March 2, 2012
RAPPAHANNOCK GOODWILL
INDUSTRIES, INC.
FROM THE CIRCUIT COURT OF THE CITY OF FREDERICKSBURG
Gordon F. Willis, Judge
Specialty Hospitals of Washington, LLC appeals from the
circuit court's judgment denying a motion to set aside a default
judgment under Rule 3:19(d)(1). We conclude that a trial court
is not required to find "actual notice" to a defendant or to
articulate its consideration of and findings with regard to the
factors listed in Rule 3:19(d)(1) when denying a motion for
relief from a default judgment. We further conclude that the
circuit court did not abuse its discretion in refusing such
relief in this case. Therefore, we will affirm the circuit
court's judgment.
RELEVANT FACTS AND PROCEEDINGS
Rappahannock Goodwill Industries, Inc. (RGI) entered into a
"Rental Laundry-Linen Service Agreement" (the Agreement) with
"Specialty Hospitals of Washington, LLC" (Specialty Hospitals),
referred to in the Agreement as the "CUSTOMER." The cover page
of the Agreement, however, indicated that it was prepared for
"Specialty Hospitals of Washington" with an address of "1310
Southern Avenue SE, Washington, DC 20032." Eugene F. Kelleher,
Director, executed the Agreement on behalf of "Specialty
Hospitals of Washington, Inc." ∗
When Specialty Hospitals allegedly did not pay for linen
and laundry services provided by RGI pursuant to the Agreement,
RGI filed a complaint in the circuit court against Specialty
Hospitals, asserting claims for breach of contract, conversion,
and quantum meruit. Because Specialty Hospitals was a foreign
corporation, RGI effected substituted service of process on
Specialty Hospitals through its statutory agent, the Secretary
of the Commonwealth. See Code §§ 8.01-301(3) and -329(A). In
its affidavit for service of process on the Secretary of the
Commonwealth, RGI listed the last known address of Specialty
Hospitals as the Southern Avenue address shown on the cover page
of the Agreement and requested service of the summons and
complaint on Specialty Hospitals' registered agent, The
Corporation Trust Company, at 1209 Orange Street, Wilmington,
Delaware. On June 7, 2010, the Secretary of the Commonwealth
filed a certificate of compliance certifying that the summons
and complaint had been forwarded by certified mail, return
∗
Any notice or communication required to be given to the
customer pursuant to the Agreement was to be sent to Eugene
Kelleher, Regional Director, Supply Chain Management, Specialty
Hospitals of Washington, 1310 Southern Avenue SE, Washington,
D.C. 20032.
2
receipt requested, to The Corporation Trust Company at the
Wilmington address on June 3, 2010.
No responsive pleadings were filed on behalf of Specialty
Hospitals. On August 16, 2010, RGI moved for default judgment
against Specialty Hospitals. The circuit court granted the
motion and, on August 23, 2010, entered judgment in favor of RGI
in the amount of $815,634.32, plus attorneys' fees in the amount
of $12,500.00 and $1,000.00 in anticipated costs to enforce the
judgment. Within 21 days of the order entering judgment for
RGI, Specialty Hospitals filed a motion under Rule 3:19(d)(1) to
set aside the default judgment. In its motion, Specialty
Hospitals alleged that service of process was defective, that
RGI's claims were against a different entity, and that it had
erroneously sued Specialty Hospitals. Specialty Hospitals
claimed that it did not own or operate the facility located at
the 1310 Southern Avenue address.
At an ore tenus hearing on Specialty Hospitals' motion,
Raymond Alvarez, "group vice president for Specialty Hospitals
of Washington," testified that an entity known as "United
Medical Center," not Specialty Hospitals, operates the facility
at the 1310 Southern Avenue address. Although Alvarez admitted
that Specialty Hospitals received the order granting default
judgment against it from The Corporation Trust Company, he
3
nevertheless denied that The Corporation Trust Company sent the
summons and complaint to Specialty Hospitals. Alvarez further
indicated that if a lawsuit had been pending against Specialty
Hospitals, his job duties would have included handling the
lawsuit or hiring counsel to do so.
Alvarez also admitted that Specialty Hospitals is
incorporated in the State of Delaware and that its registered
agent is The Corporation Trust Company. However, when asked to
whom The Corporation Trust Company would have forwarded
"paperwork" received by it in May 2010 as the registered agent
for Specialty Hospitals, Alvarez responded, "I can't answer that
question."
The circuit court found that "[t]here's nothing that's been
presented here today that the information contained within the
affidavit such as the person to be served or the address of the
registered agent is the inappropriate registered agent for the
defendant." The court further found that
[t]he evidence was a little sketchy from Mr.
Alvarez about what happened with this matter that
was served upon its registered agent by the
Secretary of the Commonwealth. There's nobody
here from [T]he Corporation Trust Company to
testify as to whether or not they received what
was sent to them by certified mail, return
receipt requested, by the Secretary of the
Commonwealth or what they did with it once they
received it. But, notice [was] provided through
proper service. And in this case the plaintiff
properly served per Virginia law the defendant.
4
Thus, the circuit court held "that the motion to set aside will
be denied. There's proper service. And for whatever reason, the
defendant did not take action to protect its interest and appear
before the [c]ourt in timely fashion."
We awarded Specialty Hospitals this appeal on two issues:
(1) whether the circuit court erred by failing to find "actual
notice" to Specialty Hospitals when denying the motion to set
aside the default judgment; and (2) whether the circuit court
erred by failing to consider all the factors set forth in Rule
3:19(d)(1).
ANALYSIS
Generally, a defendant must file responsive pleadings
within 21 days after service of the summons and complaint. Rule
3:8(a). A "defendant who fails timely to file a responsive
pleading as prescribed in Rule 3:8 is in default." Rule
3:19(a). However, Rule 3:19(d)(1) provides that within 21 days
of the entry of final judgment,
the court may by written order relieve a
defendant of a default judgment after
consideration of the extent and causes of the
defendant's delay in tendering a responsive
pleading, whether service of process and actual
notice of the claim were timely provided to the
defendant, and the effect of the delay upon the
plaintiff.
5
Whether to relieve a defendant of a default judgment under Rule
3:19(d)(1) rests within the sound discretion of a trial court.
See AME Fin. Corp. v. Kiritsis, 281 Va. 384, 392-93, 707 S.E.2d
820, 824 (2011); see also Harper v. Virginia Dep't of Taxation,
250 Va. 184, 194, 462 S.E.2d 892, 898 (1995)(holding that the
word "may" is permissive, importing discretion). Thus, on
appeal, the standard of review is whether the trial court abused
its discretion. See Poulston v. Rock, 251 Va. 254, 258-59, 467
S.E.2d 479, 482 (1996).
The circuit court's factual findings based on the evidence
adduced at the ore tenus hearing on the motion to set aside the
default judgment will be reversed on appeal only if such
findings are plainly wrong or without evidence to support them.
Ryland v. Manor Care, Inc., 266 Va. 503, 509, 587 S.E.2d 515,
519 (2003). We review such evidence in the light most favorable
to RGI as the prevailing party. Id.
Specialty Hospitals argues that the circuit court was
required to make a factual finding whether Specialty Hospitals
received actual notice of the complaint filed against it by RGI
and that the court committed reversible error by failing to do
so. According to Specialty Hospitals, the factors listed in
Rule 3:19(d)(1) should be viewed in the disjunctive and a
defendant should be relieved from a default judgment if it
6
establishes any one of those factors. Specialty Hospitals
further contends that it established all the factors and that
the circuit court erred by failing to state its consideration of
and findings on each factor. We disagree.
Service of process may be effected on a foreign corporation
in accordance with the provisions of Code § 8.01-329. Code
§ 8.01-301(3). Pursuant to Code § 8.01-329(A), service of
process or notice may be served on the Secretary of the
Commonwealth. In relevant part, that statute further provides:
Such service [on the Secretary of the
Commonwealth] shall be sufficient upon the person
to be served, provided that notice of such
service, a copy of the process or notice, and a
copy of the affidavit are forthwith mailed by
certified mail, return receipt requested, by the
Secretary to the person or persons to be served
at the last known post-office address of such
person, and a certificate of compliance herewith
by the Secretary or someone designated by him for
that purpose and having knowledge of such
compliance, shall be forthwith filed with the
papers in the action.
Code § 8.01-329(C).
As RGI notes, Specialty Hospitals did not dispute that it
is incorporated in the State of Delaware, that The Corporation
Trust Company is its registered agent, or that the registered
agent is located at the address shown in the affidavit for
service of process on the Secretary of the Commonwealth.
Neither did it challenge the accuracy of the certificate of
7
compliance, in which the Secretary of the Commonwealth certified
that legal service was made upon the Secretary of the
Commonwealth as the statutory agent in accordance with Code
§ 8.01-329, nor that the summons and complaint were forwarded by
certified mail, return receipt requested, to The Corporation
Trust Company. Indeed, the circuit court stated that Specialty
Hospitals presented no evidence to show either "that the
information contained within the affidavit such as the person to
be served or the address of the registered agent [was] the
inappropriate registered agent for [Specialty Hospitals]" or
that the information in the affidavit was "false or incorrect."
Thus, the circuit court concluded that "notice [was] provided
through proper service" by RGI under Virginia law.
In Basile v. American Filter Service, Inc., 231 Va. 34, 340
S.E.2d 800 (1986), the plaintiff obtained a default judgment in
an action against a nonresident corporation. Id. at 35, 340
S.E.2d at 800. The plaintiff effected service of process on the
nonresident corporation by serving its statutory agent, the
Secretary of the Commonwealth. Id. at 36, 340 S.E.2d at 801.
The Secretary of the Commonwealth then certified that the suit
papers had been forwarded to the defendant. Id. When the
defendant failed to file any responsive pleadings, the plaintiff
sent notice to the defendant advising that the plaintiff would
8
seek a default judgment. Id. The statutory notice by the
Secretary of the Commonwealth and the plaintiff's notice of
default judgment both were sent to the same address by certified
mail, return receipt requested, but the address did not include
a zip code. Id. Each mailing was returned unclaimed. Id.
The defendant failed to appear at the scheduled hearing for
default judgment, and the trial court awarded a default judgment
and damages against the nonresident corporate defendant. Id.
The defendant then filed a motion to set aside the default
judgment pursuant to Code § 8.01-428, alleging it had not
received actual notice of the suit but had only learned of it
through a related action. Id. at 36-37, 340 S.E.2d at 801-02.
The trial court granted the motion and set aside the default
judgment. Id. at 35, 340 S.E.2d at 801.
On appeal to this Court, the defendant argued that "the
Virginia cases in which default judgments have been upheld
involved defendants who had actual knowledge of the pendency of
suits against them and such a judgment should not be allowed to
stand where, as here, the defendant had no actual knowledge of
the litigation." Id. at 38, 340 S.E.2d at 802. However, this
Court reversed the trial court's judgment, determining that the
requirements of Code § 8.01-329 for service of process on the
Secretary of the Commonwealth were met and thus service was
9
"complete and conclusive." Id. The failure to include the zip
code in the corporate defendant's address did not invalidate the
service because the evidence before the trial court demonstrated
that "omission of the zip code could not result in delivery to
any location other than the corporation's correct address." Id.
Thus, the Court concluded that "there [was] no basis under
§ 8.01-329 for invalidating service on the statutory agent
because of the defendant's failure to receive actual notice of
the suit." Id.
Although Specialty Hospitals sought relief from the default
judgment under Rule 3:19(d)(1), not Code § 8.01-428, we
nevertheless conclude, as we did in Basile, that the
requirements in Code § 8.01-329 for service on the Secretary of
the Commonwealth were met and that service is therefore
"complete and conclusive." 231 Va. at 38, 340 S.E.2d at 802.
The evidence supported the circuit court's conclusion that
Specialty Hospitals received notice through proper service on
the Secretary of the Commonwealth pursuant to the provisions of
Code § 8.01-329. A finding by the circuit court that Specialty
Hospitals had "actual notice" was not required when denying
relief from the default judgment under Rule 3:19(d)(1).
Specialty Hospitals further contends, however, that the
circuit court erroneously failed to consider and make findings
10
with regard to all the factors enumerated in Rule 3:19(d)(1)
despite being presented with arguments and evidence on each
factor. Specialty Hospitals contends that while there is no
case law indicating "that a showing of all five factors is
necessary to set aside a default, or whether the [trial court]
must make [a finding] with regard[] to each factor," the Court,
nevertheless, should require a trial court to state its
consideration of and findings with regard to each factor, as we
do when a trial court sets aside a default judgment under Code
§ 8.01-428(D). See Ryland, 266 Va. at 510, 587 S.E.2d at 519
(holding that "a trial court's decision to set aside a default
judgment [under Code § 8.01-428(D)] is a significant action and
must, therefore, include its consideration of and findings with
regard to all the necessary elements"); Charles v. Precision
Tune, Inc., 243 Va. 313, 317-18, 414 S.E.2d 831, 833 (1992)
(stating the elements of an independent action in equity to set
aside a default judgment under what is now Code § 8.01-428(D)).
Whether a trial court must state its consideration of and
findings as to all the factors set forth in Rule 3:19(d)(1) when
relieving a defendant of a default judgment, as is required when
granting such relief under Code § 8.01-428(D), is not before us
today. For purposes of the narrow issue in this appeal, we find
nothing in the language of Rule 3:19(d)(1) requiring a trial
11
court to do so when exercising its discretion to deny a
defendant's motion to set aside a default judgment. Nor are we
willing to impose such a requirement.
Nevertheless, it may be inferred from the reasons stated by
the circuit court that it did indeed consider "the extent and
causes of the defendant's delay in tendering a responsive
pleading, whether service of process and actual notice of the
claim were timely provided to the defendant, and the effect of
the delay upon the plaintiff." Rule 3:19(d)(1); see also
Poulston, 251 Va. at 260, 467 S.E.2d at 482 (noting that
consideration of factors relevant to remitting a jury verdict
"may be 'fairly inferred from the reasons given'") (quoting
Caldwell v. Seaboard Sys. R.R., Inc., 238 Va. 148, 157, 380
S.E.2d 910, 915 (1989)). In denying the motion to set aside the
default judgment, the circuit court stated that "[t]here's
proper service. And for whatever reason, the defendant did not
take action to protect its interest and appear before the
[c]ourt in a timely fashion. And the default judgment received
is appropriate." In sum, we cannot say that the circuit court
abused its discretion in refusing to relieve Specialty Hospitals
of the default judgment entered against it.
12
CONCLUSION
For these reasons, we will affirm the judgment of the
circuit court.
Affirmed.
13