City-to-City Auto Sales, LLC v. Ronald Harris

COURT OF APPEALS OF VIRGINIA
PUBLISHED
Present: Chief Judge Decker, Judges Malveaux and Causey
Argued at Richmond, Virginia
CITY-TO-CITY AUTO SALES, LLC, ET AL.
OPINION BY
v. Record No. 0728-22-2 CHIEF JUDGE MARLA GRAFF DECKER
AUGUST 29, 2023
RONALD HARRIS
FROM THE CIRCUIT COURT OF HENRICO COUNTY
Rondelle D. Herman, Judge
Christopher T. Holinger (Mary T. Morgan; Golightly Mulligan &
Morgan, PLC, on briefs), for appellants.
Henry W. McLaughlin (The Law Office of Henry McLaughlin,
P.C., on brief), for appellee.
City-to-City Auto Sales, LLC, and Omar White1 appeal the circuit court’s grant of default
judgment against them and awards of damages and attorney fees. For the following reasons, we
affirm the decision of the circuit court.
BACKGROUND2
In August 2020, the appellee went to City-to-City Auto Sales to discuss purchasing a
truck. The appellee informed White, City-to-City’s sales manager and principal, that he “was
starting a car hauling business and needed a reliable diesel commercial truck.” White
recommended a particular truck, falsely telling the appellee that he would get a “diagnostic done
1
Although the appellants are named separately, White is the sole member of City-to-City
Auto Sales. City-to-City and White are named individually where necessary throughout this
opinion.
2
In accordance with well-established legal principles, an appellate court reviews the
evidence in the light most favorable to the prevailing party below, in this case, the appellee. See
Nichols Constr. Corp. v. Va. Mach. Tool Co., LLC, 276 Va. 81, 84 (2008).
on the engine and transmission.” The appellee made an initial payment of $3,000 to White, who
then proceeded to bid on the recommended truck. White won the bid and obtained the vehicle
for the appellee. He then told the appellee that the diagnostic check indicated an issue with the
vehicle’s air conditioning system but that otherwise it had no known mechanical problems.
Based on this representation, the appellee signed a sales contract agreeing to buy the truck for
approximately $43,000.
The contract included an arbitration provision. Through that provision, the parties agreed
that “[a]ny [d]ispute shall, at [the appellee’s] or [City-to-City Auto Sales]’s request, be resolved
by binding arbitration and not in court.” The agreement defined a “[d]ispute” as “any contract,
tort, statutory or other claim . . . between [buyer] and [s]eller arising out of or relating to . . . this
contract.”3
The appellee started to experience problems with the truck almost immediately after
taking possession. It had issues with its wheel alignment, suspension, and emission system. It
also had dirty oil, transmission fluid, and differential fluid. Less than a month after the purchase,
the truck’s engine failed.
In late April 2021, approximately eight months after taking possession of the truck, the
appellee filed a complaint in the circuit court against the appellants, alleging fraud in a
transaction for the purchase of a vehicle. It made no mention of the parties’ sales contract, and
the contract was not attached to the pleading. The complaint was served on White on May 3,
2021.
By June 10, 2021, the appellants had not filed responsive pleadings, and the appellee
filed a motion for default judgment. At a hearing on that motion on July 23, 2021, the
3
The contract included an “opt-out” provision, which required the appellee to notify
City-to-City Auto Sales in writing within ten days of signing the contract if he desired to opt out
of the arbitration agreement. The appellee did not do so.
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appellants, by counsel, appeared with a proposed answer to the complaint. Counsel argued
against the motion for default judgment and asked for leave to file a late answer on two grounds:
(1) service on City-to-City Auto Sales was defective, and (2) neither appellant ever received
notice of the motion for default judgment.
The circuit court rejected the motion for leave to file a late answer on the grounds that no
good cause was shown for filing a late response and any defect in service of the complaint on
City-to-City Auto Sales was cured by personal service on White. The court granted the
appellee’s motion for default judgment and entered an order setting the case for trial solely on
the issue of damages.
Within twenty-one days, on August 13, 2021, the appellants filed a motion to set aside
the default judgment, accompanied by a motion to compel arbitration. At that time, the
appellants presented the sales contract to the court and argued that the arbitration provision
within it was governed by the Virginia Uniform Arbitration Act. The appellee objected to those
motions in writing.
On January 13, 2022, the appellants filed a motion to continue the jury trial on damages
in order for the court to hold a hearing on the motions to set aside the default judgment and to
compel arbitration. After hearing arguments, the court denied the motion to continue because it
“came too late and would cause und[ue] delay in the proceedings.” At that time, the court also
denied the appellants’ pending motions to set aside the default judgment and send the case to
arbitration.
Before trial began on January 25, 2022, the appellants renewed the motion to compel
arbitration. They proffered that they were willing to pay for the costs of the jurors, the appellee’s
attorney fees for the day of trial, and the arbitration itself. Nonetheless, the circuit court again
denied the motion on the ground that it “came too late.”
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Proceeding with a jury trial on the question of damages, both sides presented evidence.
At the close of the appellee’s case-in-chief, the appellants made a motion to strike the evidence.
They argued that the appellee did not show any actual economic damages, lost revenue, or
emotional damages sufficient to justify an award. At the close of all the evidence, the circuit
court denied the appellants’ renewed motion to strike. After closing arguments, the appellants
moved for a mistrial based on allegedly improper closing argument by the appellee’s counsel.
The appellants contended that the appellee’s counsel had encouraged the jury to consider
statements made by White on direct examination that were stricken from the record. The court
concluded that the objection was untimely and overruled it.
The jury returned a verdict for the appellee, awarding him $33,000 in compensatory
damages and $50,000 in punitive damages. The appellants made motions for a mistrial and to set
aside the verdict. The court denied both motions. It also granted the appellee’s motion for
attorney fees and awarded him $6,450.
The appellants noted several objections to the circuit court’s final order, filed a motion to
stay, and made a motion to reconsider and set aside the judgment. The court denied those
motions.
ANALYSIS
The appellants challenge the circuit court’s decision to not enforce the arbitration
provision in the sales contract. They also appeal the awards of compensatory and punitive
damages. Finally, the appellants argue that the circuit court erred by awarding attorney fees to
the appellee.
I. Arbitration Provision
The appellants contend that the circuit court erred in refusing to set aside the default
judgment and refer the matter to arbitration.
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The decision “to relieve a defendant of a default judgment under Rule 3:19(d)(1) rests
within the sound discretion of a trial court.” Sauder v. Ferguson, 289 Va. 449, 458 (2015)
(quoting Specialty Hosps. of Wash., LLC v. Rappahannock Goodwill Indus., 283 Va. 348, 353
(2012)). A circuit court “definition[ally] abuses its discretion when it makes an error of law.”
Wynnycky v. Kozel, 71 Va. App. 177, 193 (2019) (alteration in original) (quoting Robbins v.
Robbins, 48 Va. App. 466, 475 (2006)). As applicable here, a circuit court abuses its discretion
“when it does not consider ‘a relevant factor that should have been given significant weight’;
when it considers and gives ‘significant weight’ to ‘an irrelevant or improper factor’; and when it
considers ‘all proper factors, and no improper ones,’ but ‘in weighing those factors, commits a
clear error of judgment.’” Pine Hill Grp., LLC v. Nass Grp., LLC, 76 Va. App. 384, 388 (2023)
(quoting Landrum v. Chippenham & Johnston-Willis Hosps., Inc., 282 Va. 346, 352 (2011)).
“This bell-shaped curve of reasonability governing our appellate review rests on the venerable
belief that the judge closest to the contest is the judge best able to discern where the equities lie.”
Hamad v. Hamad, 61 Va. App. 593, 607 (2013). Therefore, “only when reasonable jurists could
not differ can we say an abuse of discretion has occurred.” Pine Hill Grp., 76 Va. App. at 388
(quoting Stark v. Dinarany, 73 Va. App. 733, 746 (2021)).
The arbitration agreement in the parties’ contract provides that at the request of either
party, “[a]ny [d]ispute shall . . . be resolved by binding arbitration and not in court.”
Virginia’s Uniform Arbitration Act provides, in pertinent part, that upon application of a party
showing the existence of an arbitration agreement, “the court shall order the parties to proceed
with arbitration.”4 Code § 8.01-581.02(A); Piland Corp. v. League Constr. Co., 238 Va. 187,
190 (1989) (interpreting Code § 8.01-581.02); cf. 9 U.S.C. § 4 (providing that a “court shall
4
Virginia’s appellate courts have extensively analyzed the meaning of “shall” when used
in a statute. See Rickman v. Commonwealth, 294 Va. 531, 536-39 (2017); Bland Henderson v.
Commonwealth, 77 Va. App. 250, 257-69 (2023).
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make an order directing the parties to proceed to arbitration in accordance with the terms of the
agreement”).
Virginia’s public policy favors “arbitration and the validity of arbitration agreements.”
TM Delmarva Power, L.L.C. v. NCP of Va., L.L.C., 263 Va. 116, 122 (2002). Even so, “a party
to a contract may waive a right conferred upon it by the contract.”5 RMBS Recovery Holdings, I,
LLC v. HSBC Bank USA, N.A., 297 Va. 327, 341 (2019); see also Morgan v. Sundance, Inc., 142
S. Ct. 1708, 1713 (2022). Generally, “a waiver” is “a voluntary abandonment of some known
legal right, advantage, or privilege, or such conduct as warrants an inference of the abandonment
of such right, or the intentional doing of an act inconsistent with claiming it, all of which is
usually dependent upon the peculiar circumstances of the case.” Travis v. Finley, 36 Va. App.
189, 200 (2001) (quoting The Covington Virginian, Inc. v. Woods, 182 Va. 538, 547 (1944)). To
establish waiver, the record must show “[k]nowledge of the facts basic to the exercise of the
right and the intent to relinquish the right.”6 Stockbridge v. Gemini Air Cargo, Inc., 269 Va. 609,
5
The appellants argue pursuant to Rule 5A:18 that this Court should not consider waiver
because the appellee did not make this argument below. However, “Rule 5A:18 does not require
an appellee to raise an issue at trial before it may be considered on appeal, where the issue is not
offered to support reversal of a trial court ruling.” Harris v. Commonwealth, 39 Va. App. 670,
675 (2003) (en banc) (emphasis added) (quoting Driscoll v. Commonwealth, 14 Va. App. 449,
451 (1992)).
6
The appellants contend that Code § 8.01-581.02 required the circuit court to send the
case to arbitration once they presented the arbitration agreement. They cite federal cases
supporting the general proposition that they did not forfeit their right to arbitration and the
specific proposition that a factor relevant to the analysis is whether the party opposing arbitration
would suffer any prejudice. See, e.g., Rota-McLarty v. Santander Consumer USA, Inc., 700 F.3d
690, 702 (4th Cir. 2012); Fraser v. Merrill Lynch Pierce, Fenner & Smith, Inc., 817 F.2d 250,
252 (4th Cir. 1987). However, the Federal Arbitration Act did not create “arbitration-specific
procedural rules” for waiver. Morgan, 142 S. Ct. at 1714. In addition, the United States
Supreme Court has held “that prejudice is not a condition of finding that a party . . . waived its
right to stay litigation or compel arbitration.” Id. Consequently, we rely on Virginia cases rather
than federal ones in deciding whether the appellants waived the arbitration provision in this case.
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621 (2005); see also Sink v. Commonwealth, 13 Va. App. 544, 548 (1992) (noting that the legal
principle of waiver “focuses on the intent of the party against whom the waiver is asserted”).
A right can be waived implicitly by conduct inconsistent with the assertion of that right.
RMBS, 297 Va. at 341; see also Va. Auto Mut. Ins. Co. v. Brillhart, 187 Va. 336, 349 (1948) (“It
is, of course, elementary that silence, when there is a duty to speak, may result in the waiver of
one’s rights . . . .”). For a waiver “to be implied, it must be established by clear and convincing
evidence.” RMBS, 297 Va. at 341 (quoting Pysell v. Keck, 263 Va. 457, 460 (2002)). “[T]he
burden rests on the party relying on a waiver . . . to prove the essentials of such waiver . . . .”
Stanley’s Cafeteria, Inc. v. Abramson, 226 Va. 68, 74 (1983) (alterations in original) (quoting
Utica Mut. v. Nat’l Indem., 210 Va. 769, 773 (1970)).
In this case, the sales contract provided that any dispute would be resolved through
arbitration at the request of either party. City-to-City Auto Sales agreed to the arbitration
provision in 2020 and, consequently, knew of its contractual right to compel arbitration before
the appellee filed his complaint in April 2021. The appellants, by counsel, appeared with a
proposed answer to the complaint on July 23, 2021, but did not mention the arbitration provision
much less request arbitration at that juncture. Instead, the appellants waited until August 13,
2021, after the circuit court had granted the appellee’s motion for default judgment, to assert its
contractual right to arbitration.
This record establishes an implied waiver by clear and convincing evidence. The
appellants had notice of their right to arbitration. Nonetheless, they waited three months after
service of process to assert that right. Before doing so, the appellants appeared with a proposed
answer to the complaint and opposed default judgment. Instead of requesting arbitration as
allowed under the sales contract, the appellants acquiesced to and participated in court
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proceedings, demonstrating the intent not to pursue arbitration.7 See RMBS, 297 Va. at 343
(holding that a party’s “delay in asserting the forum selection clauses” combined with its
“active[] . . . litigation” demonstrated its waiver of its contractual right to enforce those clauses);
Stockbridge, 269 Va. at 620-21 (presuming that a party intended to relinquish a contractual
right). Consequently, the circuit court did not abuse its discretion in denying the motions to set
aside the default judgment and send the matter to arbitration.
The appellants alternatively argue that the circuit court should have ordered arbitration at
least on the question of damages. The only authority they cite in support of this position is Code
§ 8.01-581.02, which authorizes proceedings to compel arbitration. While that provision itself
does not set forth any time limits on a request for arbitration, the appellants’ argument is
unpersuasive in light of the concept of waiver and how it logically applies in this case. Liability and
damages are both essential components of the case and are therefore generally decided in the same
forum. Consequently, once the right to arbitration is waived without a specific reservation of the
right in regard to ancillary issues such as damages, it is waived for the entire case. Based on the
record before us, we conclude that when the appellants waived their right to arbitration, they did not
separately preserve the right to arbitrate the disagreement over damages. “When it is established
that the party has relinquished its right, having knowledge of the right and the intention to waive
it, the waiver will be enforced.” RMBS, 297 Va. at 342. Once the appellants waived the
7
Most decisions from other states considering similar fact patterns have come to the
same conclusion. See, e.g., Tri-State Delta Chems., Inc. v. Crow, 61 S.W.3d 172, 175 (Ark.
2001); State ex rel. Barden & Robeson Corp. v. Hill, 539 S.E.2d 106, 112 (W. Va. 2000);
Charming Shoppes, Inc. v. Overland Constr., Inc., 186 Misc. 2d 293, 296-99 (N.Y. Sup. Ct.
2000); Palmetto Constr. Grp., LLC v. Restoration Specialists, LLC, 834 S.E.2d 204, 207-08
(S.C. Ct. App. 2019), aff’d as modified, 856 S.E.2d 150 (S.C. 2021); LaFrance Architect v. Point
Five Dev. S. Burlington, LLC, 91 A.3d 364, 372-74 (Vt. 2013); Interconex, Inc. v. Ugarov, 224
S.W.3d 523, 535-39 (Tex. App. 2007). But see Running Cars, LLC v. Miller, 333 So. 3d 1177,
1180 (Fla. Dist. Ct. App. 2022); Brand FX, LLC v. Rhine, 458 S.W.3d 195, 204 (Tex. App.
2015).
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contractual right to arbitration, it was appropriate for the circuit court to resolve the question of
damages by sending the issue of damages to a jury.
For these reasons, the circuit court did not abuse its discretion in denying the motion to
set aside the default judgment or the motion to compel arbitration.8
II. Damages
The appellants argue that the circuit court erred by approving the jury’s respective awards
of damages. They suggest that the amounts of compensatory and punitive damages were not
supported by the evidence.
When a jury returns an excessive damages verdict, a circuit court may order a remittitur
or a new trial. Hale v. Maersk Line Ltd., 284 Va. 358, 376 (2012). The court’s decision to
accept or reject a jury’s award of damages is reviewed by an appellate court for abuse of
discretion. Allied Concrete Co. v. Lester, 285 Va. 295, 311 (2013).
An award of damages must be set aside if the amount “is so great” that it “shock[s] the
conscience of the court” and “create[s] the impression that the jury” was “motivated by passion,
corruption[,] or prejudice,” or misunderstood “the facts or the law, or if the award is so out of
proportion to the injuries suffered as to suggest that it is not the product of a fair and impartial
decision.” Id. (quoting Edmiston v. Kupsenel, 205 Va. 198, 202 (1964)). In conducting this
review, courts view the evidence in the light most favorable to the prevailing party below, in this
case, the appellee. Shepard v. Capitol Foundry of Va., Inc., 262 Va. 715, 721 (2001). “If there
is evidence, when viewed in that light, to sustain the jury verdict,” a circuit court must accept the
jury’s award of damages. Id. A “trial court must accord the jury verdict [on damages] the
8
In conducting our analysis, we assume without deciding that the appellants did not
procedurally default their right to arbitration by failing to file a timely answer or other responsive
pleading under Rule 3:8. See generally McGinnis v. Commonwealth, 296 Va. 489, 501 (2018)
(assuming without deciding that an issue was properly before the Court because addressing it on
the merits provided the best and narrowest ground for resolution).
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‘utmost deference.’” Condo. Servs., Inc. v. First Owners’ Ass’n of Forty Six Hundred Condo.,
Inc., 281 Va. 561, 580 (2011) (quoting Bussey v. E.S.C. Rests., Inc., 270 Va. 531, 534 (2005)).
These well-established legal principles guide our appellate review of the issue of
damages. We now turn to examine both the compensatory and punitive damage awards.
A. Compensatory Damages
A party seeking compensatory damages must prove “with reasonable certainty” both “the
amount of damages and the cause from which they resulted.” Manchester Oaks Homeowners
Ass’n v. Batt, 284 Va. 409, 423 (2012) (quoting Shepherd v. Davis, 265 Va. 108, 125 (2003));
see also CGI Fed. Inc. v. FCi Fed., Inc., 295 Va. 506, 517 (2018) (applying the same “reasonable
certainty” standard “[w]hen a defrauded party seeks compensatory damages in the form of lost
profits”).
The evidence of damages incurred by the appellee included direct losses stemming from
the purchase of the truck, as well as towing and repair costs. The appellee paid $6,000 toward
the cost of the faulty truck. He testified that he also paid $3,651.66 for towing and repairs and
$6,300 to rent another truck.
In addition, evidence of damages encompassed indirect losses stemming from the
appellee’s lost business revenue and his depression. The appellee bought the truck intending to
use it for his new “car handling business.” Before starting the business, the appellee earned
wages of $1,000 per week. However, when he started the new business, he was unable to fulfill
any car-hauling contracts between August 29, 2020, and February 9, 2021, and he lost revenue as
a result. For the first eight months after opening the business, the period in which he had the
faulty truck, the business lost $64,015.44. The appellee used his life savings for living expenses
during that time. From May 2021 through the end of that year, after he bought a new truck to
replace the faulty one, the appellee’s business had an average net monthly profit of $18,720.88.
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In addition to the revenue the appellee lost while he had the faulty truck, he experienced
depression due to his inability to earn income.
After hearing this evidence, the jury awarded compensatory damages of $33,000. The
jury was instructed that the appellee bore the burden of proof for damages, such that he “must
show sufficient facts and circumstances” to provide a basis for a “reasonable estimate” of the
amount of damages. The court told the jury that it “must not base [the award] in any way upon
sympathy, bias, guesswork or speculation.”
The record provides no indication that the jury did not follow the court’s instructions.
See, e.g., Prieto v. Commonwealth, 283 Va. 149, 169 (2012) (recognizing the axiom that
appellate courts presume jurors followed their instructions). The appellee testified that he paid
$15,951.66 for the truck, its ensuing towing and repairs, and renting a substitute. He established
business losses totaling $64,015.44. Viewing the record in the light most favorable to the
appellee, it contains a sufficient basis supporting the jury’s assessment of $33,000 in
compensatory damages. For these reasons, the circuit court did not abuse its discretion “in
determining that the verdict was not excessive and not so out of proportion to the injuries
suffered as to suggest that it was not the product of a fair and impartial decision.” See John
Crane, Inc. v. Jones, 274 Va. 581, 596-97 (2007).
B. Punitive Damages
“The purpose of punitive damages is to provide ‘protection of the public, . . . punishment
to [the] defendant, and . . . a warning and example to deter him and others from committing like
offenses.’” Coalson v. Canchola, 287 Va. 242, 249 (2014) (alterations in original) (quoting
Huffman v. Love, 245 Va. 311, 315 (1993)). “Under the common law, ‘[p]unitive . . . damages
are allowable only where there is misconduct or actual malice, or such recklessness or
negligence as to evince a conscious disregard of the rights of others.’” A.H. v. Church of God in
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Christ, Inc., 297 Va. 604, 636 (2019) (first alteration in original) (quoting Xspedius Mgmt. Co. of
Va., L.L.C. v. Stephan, 269 Va. 421, 425 (2005)); see also Bowers v. Westvaco Corp., 244 Va.
139, 150 (1992) (“A litigant, who seeks an award of punitive damages, must present evidence
that the defendant’s acts were ‘so willful or wanton as to evince a conscious disregard of the
rights of others, as well as malicious conduct . . . .’” (alteration in original) (quoting Booth v.
Robertson, 236 Va. 269, 273 (1988))). This element can be proven by direct or circumstantial
evidence. Jordan v. Sauve, 219 Va. 448, 453 (1978) (considering the level of proof necessary to
support punitive damages in a fraud case).
In this case, the appellee established that the appellants fraudulently sold him a truck.
When the appellee bought the truck, White represented that “a diagnostic [workup] had been
done” and the vehicle was in good working order except for the air conditioner. Contrary to this
representation, the truck “never operated properly.” When the appellee reported the problems to
White, he directed the appellee to the warranty company. By that time, the warranty had expired
because the appellee had driven the truck more than 1,000 miles. These facts support the
inference that the appellants either had not completed diagnostic testing on the truck or knew that
the truck had extensive mechanical problems at the time of the sale. Under either scenario,
White willfully lied to the appellee to complete the sale.
The jury found the evidence merited punishing the appellants. The record, when viewed
in the light most favorable to the appellee, supports the jury’s conclusion that the appellants’
misconduct was malicious or wanton. See Bowers, 244 Va. at 150. “Though not inevitable, this
was a possible conclusion, making the punitive damage issue one for the jury to decide . . . .”9
9
We conclude that the holding in Supervalu, Inc. v. Johnson, 276 Va. 356, 368 (2008), in
which the evidence was not sufficient to support the constructive fraud claim, does not require a
different outcome here.
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See Jordan, 219 Va. at 454. Therefore, the circuit court did not abuse its discretion by accepting
the jury verdict awarding the appellee punitive damages.
III. Attorney Fees
Last, the appellants contend that the circuit court erred by awarding attorney fees.
“No ruling of the trial court . . . will be considered as a basis for reversal unless an
objection was stated with reasonable certainty at the time of the ruling, except for good cause
shown or to enable th[e] Court to attain the ends of justice.” Rule 5A:18. An appellant’s
opening brief must include an “exact reference” to the pages of the record or appendix reflecting
where the alleged error was preserved below. Rule 5A:20(c); cf. Brooks v. Commonwealth, 61
Va. App. 576, 581 (2013) (en banc) (explaining that the purpose of the exact-reference
requirement is “to spare the Court from having to comb the entire record to determine whether
and where the alleged error was preserved”).
Below, the appellants did not challenge the award of attorney fees. The pages that the
appellants’ brief cites as showing where they preserved this objection do not in fact do so.
Although the appellants objected to the damages, they did not object to the award of attorney
fees. Accordingly, this argument is barred pursuant to Rule 5A:18, and we do not consider it on
appeal. See Tackett v. Arlington Cnty. Dep’t of Hum. Servs., 62 Va. App. 296, 315 (2013).
CONCLUSION
The appellants waived the contractual right to arbitration by not asserting it until after
they offered a responsive pleading and the circuit court granted the appellee’s motion for default
judgment. Consequently, the court did not abuse its discretion by refusing to set aside the default
judgment and compel arbitration. In addition, the damage awards were supported by the
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evidence. Last, review of the award of attorney fees is procedurally barred. For these reasons,
we affirm the judgment of the circuit court.
Affirmed.
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