Sauder v. Ferguson ( 2015 )

PRESENT: All the Justices
SUSAN M. SAUDER
OPINION BY
v. Record No. 140805 JUSTICE ELIZABETH A. McCLANAHAN
April 16, 2015
DENNIE LEE FERGUSON, JR.
FROM THE CIRCUIT COURT OF ROCKINGHAM COUNTY
Bruce D. Albertson, Judge
Susan M. Sauder appeals from the final order of the
circuit court denying her motion to set aside the default
judgment entered in her favor against Dennie Lee Ferguson, Jr.
Sauder argues the circuit court had no discretion to deny her
motion because the default judgment was void ab initio as a
result of her failure to obtain valid service upon Ferguson.
In the alternative, she contends the circuit court abused its
discretion in failing to set aside a default judgment that was
void ab initio. We will affirm the judgment of the circuit
court.
I. BACKGROUND
On October 15, 2009, Sauder and Ferguson were involved in
an automobile accident in which the vehicles being operated by
each of them collided with one another. Subsequently,
Progressive Gulf Insurance Company ("Progressive"), which
provided coverage on the vehicle Ferguson was operating at the
time of the accident, filed a declaratory judgment action
seeking a determination that it was not obligated to provide
coverage for the accident because Ferguson was not a permissive
user of the vehicle. Progressive named as defendants,
Rockingham Mutual Insurance Company ("Rockingham Mutual"),
Rockingham Casualty Company ("Rockingham Casualty"), Sauder and
Ferguson. Because Rockingham Mutual does not provide
automobile insurance coverage, it was dismissed from the action
by order of nonsuit. Rockingham Casualty remained in the
action due to potential liability under an uninsured motorist
policy covering Sauder at the time of the accident.
During the pendency of the declaratory judgment action,
Ferguson testified in a deposition taken on August 23, 2010,
that he was currently residing with his mother at 2210 John
Wayland Highway in Harrisonburg and was living at that address
at the time of the accident. He also testified he was employed
in his mother's business and provided both his and his mother's
current cellular telephone numbers. Sauder was represented by
counsel who conducted examination of Ferguson on Sauder's
behalf.
At the trial of the declaratory judgment action, which
took place on May 19, 2011, Ferguson again testified that he
was residing with his mother and employed in her business.
Sauder was represented by counsel who was also present at the
trial. At the conclusion of the trial, the circuit court ruled
that Ferguson was an uninsured motorist at the time of the
2
accident. Thus, Rockingham Casualty's policy of uninsured
motorist insurance provides coverage for the first $100,000 of
any judgment that Sauder is legally entitled to recover against
Ferguson for damages arising from the accident.
On June 10, 2011, Sauder filed, by different counsel, a
complaint against Ferguson seeking damages arising from the
automobile accident. On June 29, 2011, Sauder served Ferguson
by posting at 1460 West Market Street in Harrisonburg, the
address that was listed for Ferguson on the police report of
the accident, instead of the address given by Ferguson in his
deposition and at trial in the declaratory judgment action. On
the same date, Sauder served Rockingham Mutual, by personal
service on its registered agent, instead of Rockingham
Casualty, which provides the uninsured motorist coverage for
the accident.1
On August 29, 2012, Sauder filed a motion for entry of
default judgment on the grounds that no pleadings in response
to Sauder's complaint had been filed on behalf of Ferguson.
Sauder filed a subsequent motion for entry of default judgment
on September 24, 2012. In this motion, Sauder stated that the
second motion for entry of default judgment was filed because
1
W. Neal Menefee is the registered agent for both
Rockingham Mutual and Rockingham Casualty.
3
Sauder was required to notify Ferguson of the implications of
not appearing at the hearing scheduled on October 17, 2012. On
October 2, 2012, Sauder attempted to serve Ferguson at the 1460
West Market Street address with the motion, notice of motion
for entry of default judgment on October 17, 2012, and proposed
order entering judgment by default. She also mailed the
motion, notice, and proposed order to the 1460 West Market
Street address as well as an address in Ashland, Kentucky. The
proof of service was returned showing that Ferguson was "Not
Found" and with a notation of "Moved."
On October 12, 2012, Sauder served the motion, notice of
motion, and proposed order on Ferguson at the 2210 John Wayland
Highway address in Harrisonburg by delivery to his mother.
Neither Ferguson nor anyone on his behalf appeared, and an
order of default judgment was entered by the circuit court on
November 29, 2012. The order instructed that a copy be served
upon Ferguson at 220 (instead of 2210) John Wayland Highway in
Harrisonburg. A proof of service shows that Ferguson was
personally served with the order entering judgment by default
on December 10, 2012. Various papers were also served on the
secretary to W. Neal Menefee as registered agent for
"Rockingham Group Insurance" on January 8, 2013.
On January 9, 2013, the circuit court entered an order
setting a bench trial on damages for March 4, 2013. Sauder
4
personally served the scheduling order on Ferguson at the 2210
John Wayland Highway address. Menefee was also personally
served with this order. On March 4, 2013, Sauder presented
evidence of her damages and neither Ferguson nor anyone on his
behalf appeared. On March 14, 2013, the circuit court entered
an order awarding Sauder $300,000 in damages. The order
provided that "Rockingham Mutual is liable for its contractual
portion of Ms. Sauder's Uninsured Motorist Policy" based upon
the following grounds:
Rockingham Mutual Insurance Company and/or
Rockingham Casualty Company ("Rockingham Mutual")
– same name, both entities of the Rockingham
Group with the same address, registered agent,
payer of her medical expense coverage,
corresponded with Plaintiff's attorney, and party
in the Declaratory Action participated in the
Declaratory Action and cooperated with
Plaintiff's counsel prior to the Court's ruling.
Ms. Sauder was insured by a policy with
Rockingham Mutual Insurance Company and/or
Rockingham Casualty Company ("Rockingham Mutual")
due to its Uninsured Motorist Coverage Policy
with coverage limits of $100,000[.]
On April 5, 2013, Rockingham Casualty filed a complaint
for declaratory judgment seeking a determination that Sauder
was not legally entitled to collect the judgment rendered on
March 14, 2013, because Ferguson was never served with the
summons or complaint and Rockingham Casualty was never served
5
as required by Code § 38.2-2206(F).2 Thereafter, on May 14,
2013, Sauder filed a motion to set aside the default judgment
pursuant to Code § 8.01-428(A). She averred that there
"existed some question" regarding whether Ferguson was validly
served with process. Sauder asserted that it is "[Sauder's]
position that Ferguson was validly and properly served, that
[Sauder] and her counsel used due diligence in attempting to
locate and serve Ferguson, and that Ferguson's due process
rights have not been violated by entry of the default
judgment." Nevertheless, Sauder requested that the circuit
court enter an order setting aside the March 14, 2013, order as
void ab initio "out of an abundance of caution" and "in order
to serve substantial justice."
Sauder contended in her motion that if the default
judgment against Ferguson was obtained without adequate and
valid service of process, "then that [March 14, 2013 o]rder
must be set aside as void ab initio, and Sauder's suit and the
parties to that action (Sauder and Ferguson) must be restored
to their status prior to entry of the [o]rder on judgment,"
after which Sauder will "be entitled to exercise a non-suit as
2
Code § 38.2-2206(F) requires an insured intending to rely
upon uninsured motorist coverage to serve the insurance carrier
with process.
6
a matter of right" and "have six months within which to re-file
her suit against Ferguson."
Rockingham Mutual filed a response asserting that Sauder's
motion to set aside was fatally deficient because she alleged
in her motion that "Ferguson was validly and properly served,"
and therefore, failed to acknowledge any deficiency that would
render the judgment void. Subsequently, Sauder filed an
amended motion to set aside the default judgment on the grounds
that "substantial evidence exists" that Ferguson was not
properly served with process, and therefore, "substantial
evidence exists that the default judgment and [o]rder of March
14, 2013 is and was void ab initio."
Rockingham Mutual filed a memorandum in opposition to the
motion to set aside the default judgment. Sauder objected to
Rockingham's participation in the proceedings and argued that
Rockingham Mutual had no standing to oppose Sauder's motion.
The circuit court requested briefing from the parties and
conducted a hearing during which the parties presented
evidence, including testimony from Ferguson, who was called as
a witness by Sauder.3 Ferguson testified that although he lived
at the 1460 West Market Street address in 2008, he was living
3
Ferguson has not made a formal appearance in these
proceedings.
7
with his mother at the 2210 John Wayland Highway address when
Sauder's complaint was filed. Ferguson further testified he
was never served with a complaint or summons.
Upon consideration of the evidence, briefs, and arguments
of counsel, the circuit court denied Sauder's motion to set
aside the default judgment. As an initial matter, the court
ruled that Rockingham Mutual had standing to participate and
present evidence at the hearing. The court further ruled that
it would not exercise its discretion to set aside the default
judgment.
The circuit court found that based on Ferguson's testimony
in the prior declaratory judgment action providing his address
as 2210 John Wayland Highway, Sauder had "knowledge" of
Ferguson's current address but used the 1460 West Market Street
address to attempt service of the complaint and summons. The
court further noted that when Sauder served the motion for
default judgment, notice of motion for default judgment, and
proposed order entering default judgment at the 2210 John
Wayland Highway address, she did not include a copy of the
complaint or summons and made no further attempt to do so. The
court explained it could "see how many of the enumerated
grounds would cover situations, such as fraud, where the Court
should exercise its discretion on a moving plaintiff's behalf."
8
According to the court, "[t]he facts of this case do not call
for that discretion."
II. ANALYSIS
On appeal, Sauder argues that the circuit court erred in
denying her motion to set aside the default judgment and in
ruling that Rockingham Mutual had standing to participate in
the proceedings related thereto.
A. Circuit Court Had Discretion under Code § 8.01-
428(A).
We reject Sauder's first assertion that the circuit court
did not have discretion to deny her motion to set aside the
default judgment under Code § 8.01-428(A).
Code § 8.01-428(A) provides:
Upon motion of the plaintiff or judgment
debtor and after reasonable notice to the
opposite party, his attorney of record or other
agent, the court may set aside a judgment by
default or a decree pro confesso upon the
following grounds: (i) fraud on the court, (ii) a
void judgment, (iii) on proof of an accord and
satisfaction, or (iv) on proof that the defendant
was, at the time of service of process or entry
of judgment, a person in the military service of
the United States for purposes of 50 U.S.C. app.
§ 502.
(Emphasis added.) In stating that the court "may" set aside a
judgment of default, the language of the statute, according to
its ordinary meaning, places the decision of whether to set
aside a judgment by default within the discretion of circuit
court.
9
We will apply the ordinary meaning of the word "may" in
construing a statute unless a contrary legislative intention
plainly appears. Masters v. Hart, 189 Va. 969, 979, 55 S.E.2d
205, 210 (1949) ("Unless it is manifest that the purpose of the
legislature was to use the word 'may' in the sense of 'shall'
or 'must,' then 'may' should be given its ordinary meaning -
permission, importing discretion."). The General Assembly uses
the word "may" six times in Code § 8.01-428 while it uses the
word "shall" four times.4 "When the General Assembly uses two
4
The statute, in its entirety provides:
A. Default judgments and decrees pro confesso;
summary procedure. -- Upon motion of the
plaintiff or judgment debtor and after reasonable
notice to the opposite party, his attorney of
record or other agent, the court may set aside a
judgment by default or a decree pro confesso upon
the following grounds: (i) fraud on the court,
(ii) a void judgment, (iii) on proof of an accord
and satisfaction, or (iv) on proof that the
defendant was, at the time of service of process
or entry of judgment, a person in the military
service of the United States for purposes of 50
U.S.C. app. § 502. Such motion on the ground of
fraud on the court shall be made within two years
from the date of the judgment or decree.
B. Clerical mistakes. -- Clerical mistakes in all
judgments or other parts of the record and errors
therein arising from oversight or from an
inadvertent omission may be corrected by the
court at any time on its own initiative or upon
the motion of any party and after such notice, as
the court may order. During the pendency of an
appeal, such mistakes may be corrected before the
10
different terms in the same act, it is presumed to mean two
different things." Forst v. Rockingham Poultry Mktg. Coop.,
appeal is docketed in the appellate court, and
thereafter while the appeal is pending such
mistakes may be corrected with leave of the
appellate court.
C. Failure to notify party or counsel of final
order. -- If counsel, or a party not represented
by counsel, who is not in default in a circuit
court is not notified by any means of the entry
of a final order and the circuit court is
satisfied that such lack of notice (i) did not
result from a failure to exercise due diligence
on the part of that party and (ii) denied that
party an opportunity to pursue post-trial relief
in the circuit court or to file an appeal
therefrom, the circuit court may, within 60 days
of the entry of such order, modify, vacate, or
suspend the order or grant the party leave to
appeal. Where the circuit court grants the party
leave to appeal, the computation of time for
noting and perfecting an appeal shall run from
the entry of such order, and such order shall
have no other effect.
D. Other judgments or proceedings. -- This
section does not limit the power of the court to
entertain at any time an independent action to
relieve a party from any judgment or proceeding,
or to grant relief to a defendant not served with
process as provided in § 8.01-322, or to set
aside a judgment or decree for fraud upon the
court.
E. Nothing in this section shall constitute
grounds to set aside an otherwise valid default
judgment against a defendant who was not, at the
time of service of process or entry of judgment,
a servicemember for purposes of 50 U.S.C. app. §
502.
Code § 8.01-428 (emphases added).
11
222 Va. 270, 278, 279 S.E.2d 400, 404 (1981). The General
Assembly is well aware of the difference between the words
"may" and "shall," and we conclude it has not used these terms
synonymously within the language of Code § 8.01-428. See Roe
v. Commonwealth, 271 Va. 453, 458, 628 S.E.2d 526, 529 (2006).
Similarly, Rule 3:19(d)(1) states that "the court may"
relieve a defendant of a default judgment during the 21-day
period provided by Rule 1:1. We have held that "[w]hether to
relieve a defendant of a default judgment under Rule 3:19(d)(1)
rests within the sound discretion of a trial court." Specialty
Hosps. of Washington, LLC v. Rappahannock Goodwill Indus., 283
Va. 348, 353, 722 S.E.2d 557, 559 (2012). Additionally, Rule
3:19(b) states that "[p]rior to the entry of judgment, for good
cause shown the court may grant leave to a defendant who is in
default to file a late responsive pleading." Thus, we have
observed that "the use of the word 'may,' as opposed to
'shall,' in Rule 3:19(b) evidences that even after a defendant
shows good cause, a trial court has discretion to grant or
refuse the defendant's motion for leave to file late responsive
pleadings." AME Fin. Corp. v. Kiritsis, 281 Va. 384, 392, 707
S.E.2d 820, 824 (2011) (emphasis omitted).
Likewise, in construing the plain language of Code § 8.01-
428(A) providing that the court "may" set aside a default
judgment upon the grounds designated therein, we hold that the
12
decision whether to grant Sauder's motion to set aside the
default judgment rested within the sound discretion of the
circuit court.
B. The Circuit Court did not Abuse its Discretion
Sauder argues that even if the decision of whether to
grant her motion to set aside the default judgment was within
the circuit court's discretion, the circuit court abused its
discretion in refusing to set aside a judgment that was proved
to be void ab initio.
We have explained that the phrase "abuse of discretion"
means that the circuit court "has a range of choice, and that
its decision will not be disturbed as long as it stays within
that range and is not influenced by any mistake of law."
Landrum v. Chippenham & Johnston-Willis Hosps., Inc., 282 Va.
346, 352, 717 S.E.2d 134, 137 (2011) (internal quotation marks
omitted); see also Hamad v. Hamad, 61 Va. App. 593, 607, 739
S.E.2d 232, 239 (2013) ("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."). Thus,
"'[o]nly when reasonable jurists could not differ can we say an
abuse of discretion has occurred.'" Grattan v. Commonwealth,
278 Va. 602, 620, 685 S.E.2d 634, 644 (2009) (quoting Thomas v.
13
Commonwealth, 44 Va. App. 741, 753, 607 S.E.2d 738, 743
(2005)).
Pursuant to Code § 8.01-428(A), Sauder filed a motion
seeking to set aside the default judgment entered in her favor
upon the ground that the judgment was void for lack of personal
service on Ferguson.5 "There are strong policy reasons favoring
certainty of results in judicial proceedings. Accordingly, we
5
Subsection (A) of Code § 8.01-428 applies to "a motion
filed as part of the cause in which the judgment order was
entered." Basile v. American Filter Service, Inc., 231 Va. 34,
37, 340 S.E.2d 800, 802 (1986). This is distinguished from an
"independent action" seeking relief from judgment referenced in
section D of the statute. Therefore, as the revisor's note
states, "[a] court's inherent equity power to entertain an
independent action to relieve a party from any judgment has
been preserved" by Code § 8.01-428(D). Byrum v. Lowe & Gordon,
Ltd., 225 Va. 362, 365-66, 302 S.E.2d 46, 48 (1983). A party
seeking to set aside a default judgment in such an independent
action must prove five elements:
(1) a judgment which ought not, in equity and
good conscience, to be enforced; (2) a good
defense to the alleged cause of action on which
the judgment is founded; (3) fraud, accident, or
mistake which prevented the defendant in the
judgment from obtaining the benefit of his
defense; (4) the absence of fault or negligence
on the part of the defendant; and (5) the absence
of any adequate remedy at law.
Virginia Polytechnic Inst. & State Univ. v. Prosper Fin., Inc.,
284 Va. 474, 483, 732 S.E.2d 246, 251 (2012) (quoting Charles
v. Precision Tune, Inc., 243 Va. 313, 317-18, 414 S.E.2d 831,
833 (1992)).
14
attach a high degree of finality to judgments, whether obtained
by default or otherwise." McEwen Lumber Co. v. Lipscomb
Brothers Lumber Co., 234 Va. 243, 247, 360 S.E.2d 845, 848
(1987). Thus, "we have consistently construed Code § 8.01-428
and its predecessors, which create exceptions to the finality
of judgments, narrowly." Id. Furthermore, since Code § 8.01-
428 is a codification of pre-existing equitable practice, the
court's discretionary power is informed by equitable
considerations.
Although the circuit court observed that neither Sauder
nor Rockingham Mutual disputed the fact that the complaint and
summons were not served on Ferguson, it did not reach the issue
of whether the judgment was void. Instead, it ruled that the
facts did not justify the relief sought by Sauder. According
to the circuit court,
The record reveals at a minimum that
[Sauder] failed to procure proper service.
[Sauder] became aware of the service of process
failure. [Sauder] did not correct the error.
Nonetheless, [Sauder] asserted proper service and
the default judgment she sought was entered.
This alone is sufficient for the Court to deny
the motion.6
6
The circuit court clearly considered the absence of
proper service here. Along with the other circumstances noted
in the disposition, this demonstrates that, in the present
case, it cannot be said that "a relevant factor that should
have been given significant weight [was] not considered; . . .
an irrelevant or improper factor [was] considered and given
15
"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." Specialty Hosps., 283 Va. at 354, 722 S.E.2d at 559.
Based on the circuit court's findings, which are supported
by the record, we cannot say the circuit court abused its
discretion. As the circuit court found, Sauder had knowledge
of Ferguson's correct address when she attempted to serve the
complaint and summons on him at a prior address.7 When the
questions regarding the validity of the service became
apparent, Sauder used Ferguson's proper address for service of
additional pleadings but did not at any time serve the
complaint and summons at his current address. Furthermore,
Sauder proceeded to seek and obtain a default judgment
asserting valid service of the complaint and summons.
significant weight; [or that] the court, in weighing those
factors, commit[ed] a clear error of judgment." Landrum, 282
Va. at 352, 717 S.E.2d at 137.
7
Ferguson provided his address during testimony at his
deposition and at the declaratory judgment trial. Sauder was
represented by counsel at both proceedings. Knowledge acquired
by an attorney is imputed to the client. Yamada v. McLeod, 243
Va. 426, 433, 416 S.E.2d 222, 226 (1992).
16
Thereafter, she obtained a final judgment awarding the full
amount of damages she claimed.8 As the circuit court observed,
there may be situations in which one of the grounds enumerated
in the statute justify relief from judgment on a moving
plaintiff's behalf. In this case, however, Sauder is "the
architect of [her] own misfortune." Landcraft Co. v. Kincaid,
220 Va. 865, 874, 263 S.E.2d 419, 425 (1980) (decided under
predecessor statute, Code § 8-348).9
8
We have held that a circuit court erred in denying a
motion to set aside a default judgment for lack of service when
a defendant challenges the circuit court's exercise of personal
jurisdiction and seeks to preclude enforcement of the judgment.
See, e.g., Lifestar Response of Md., Inc. v. Vegosen, 267 Va.
720, 724-25, 594 S.E.2d 589, 591-92 (2004); O'Connell v. Bean,
263 Va. 176, 178-80, 556 S.E.2d 741, 742 (2002); Dennis v.
Jones, 240 Va. 12, 19-20, 393 S.E.2d 390, 394 (1990). In this
case, however, Sauder does not seek to set aside the judgment
so as to preclude its enforcement against Ferguson; rather, she
seeks to continue these proceedings so as to nonsuit her case
and take a "second bite at the apple" against Ferguson. Yet,
Ferguson has not made a formal appearance to raise a challenge
to the judgment himself. Thus, in contrast to a defendant who
challenges a judgment based on the absence of notice and an
opportunity to be heard, Sauder was not deprived of an
opportunity to fully and fairly present her claims.
9
We find no merit in Sauder's contention that Rockingham
Mutual lacked standing to present evidence and argument in
opposition to her motion to set aside the default judgment.
Although Sauder argues that Rockingham Mutual is not her
uninsured motorist carrier and has no stake in the matter,
Rockingham Mutual was served with the complaint and summons as
her purported uninsured motorist carrier, and the circuit court
ordered that "Rockingham Mutual is liable for its contractual
portion of Ms. Sauder's Uninsured Motorist Policy."
17
III. CONCLUSION
For the foregoing reasons, we will affirm the judgment of
the circuit court.
Affirmed.
JUSTICE POWELL, with whom JUSTICE MIMS joins, concurring.
Although I agree with the outcome of this case, I write
separately because I disagree with the basis for the majority’s
decision. Based on the circuit court's findings, which are
supported by the evidence, I would conclude that Sauder is
estopped from denying the validity of the judgment.
As the circuit court found, Sauder had knowledge of
Ferguson's correct address when she attempted to serve the
complaint and summons on him at a prior address.1 When the
questions regarding the validity of the service became
apparent, Sauder used Ferguson's proper address for service of
additional pleadings but did not at any time serve the
complaint and summons at his current address. Furthermore,
Sauder proceeded to seek and obtain a default judgment
asserting valid service of the complaint and summons. See
1
Ferguson provided his address during testimony at his
deposition and at the trial in the declaratory judgment action.
Sauder was represented by counsel at both proceedings.
Knowledge acquired by an attorney is imputed to the client.
Yamada v. McLeod, 243 Va. 426, 433, 416 S.E.2d 222, 226
(1992)(collecting cases).
18
Eubank & Caldwell, Inc. v. Fuller, 156 Va. 635, 638, 158 S.E.
884, 885 (1931) (a party with knowledge of the facts affecting
the validity of a judgment who “accepts and treats [the
judgment] as valid and binding in all respects . . . will not
be permitted later to show its invalidity[,] for he is
estopped”); Smith v. Litton, 167 Va. 263, 266, 188 S.E. 214,
215 (1936) (“A man cannot say at one time that the transaction
is valid and thereby obtain some advantage to which he could
only be entitled on the footing that it is valid, and at
another time say it is void for the purpose of securing some
further advantage.”) (citation and internal quotation marks
omitted); see also Lofton Ridge, LLC v. Norfolk S. Ry. Co., 268
Va. 377, 381, 601 S.E.2d 648, 650 (2004) (judicial estoppel
prohibits a party “from taking inconsistent positions within a
single action”).
Under these facts, therefore, Sauder cannot now deny the
validity of the judgment and is judicially estopped from
seeking to set it aside.2 For these reasons, I would affirm
the judgment of the circuit court.
2
I find no merit in Sauder’s contention that Rockingham
Mutual lacked standing to present evidence and argument in
opposition to her motion to set aside the default judgment.
Although Sauder argues that Rockingham Mutual is not her
uninsured motorist carrier and has no stake in the matter,
Rockingham Mutual was served with the complaint and summons as
her purported uninsured motorist carrier, and the circuit court
19
ordered that “Rockingham Mutual is liable for its contractual
portion of Ms. Sauder's Uninsured Motorist Policy.”
20