Virginia Polytechnic Institute v. Prosper Financial ( 2012 )

Present: Kinser, C.J., Lemons, Goodwyn, Millette, Mims and
Powell, JJ., and Lacy, S.J.
VIRGINIA POLYTECHNIC INSTITUTE
AND STATE UNIVERSITY
v. Record No. 111912 OPINION BY SENIOR JUSTICE
ELIZABETH B. LACY
PROSPER FINANCIAL, INC. September 14, 2012
FROM THE CIRCUIT COURT OF MONTGOMERY COUNTY
Robert M. D. Turk, Judge
In this appeal we consider whether the trial court erred in
setting aside a default judgment in an action filed pursuant to
Code § 8.01-428(D).
Background
In 2008, Virginia Polytechnic Institute and State
University (“VPI”) and Prosper Financial, Inc. (“Prosper”)
entered into a research contract. The contract between the
parties stated, on the first page, that Prosper had offices at
4801 Alhambra Circle, Coral Gables, Florida 33146. Another
provision of the contract provided that “[a]ny notices required
to be given or which shall be given” to Prosper under the
contract should be addressed to P.O. Box 331916, Miami, Florida
33233-1916.
In 2010, VPI filed a complaint in the Circuit Court of
Montgomery County, Virginia claiming that Prosper breached the
2008 contract. Because Prosper was a Florida corporation, VPI
sought to effect service of process through the company’s
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, VPI stated that
Prosper was a foreign corporation and listed the post office box
address contained in the notice provision of the contract as
Prosper’s last known address. The Secretary of the Commonwealth
filed a Certificate of Compliance certifying that the complaint
and summons had been sent by certified mail, return receipt
requested, to Prosper at the post office box address. See Code
§ 8.01-329(C). Prosper did not file responsive pleadings and,
on VPI’s motion, the trial court entered a default judgment for
$783,408.72 against Prosper on June 8, 2010.
In 2011, Prosper filed a motion pursuant to subsection (A)
of Code § 8.01-428 asking the trial court to vacate the default
judgment order. Prosper alleged that the default judgment was
void or voidable for failure to comply with the requirements for
service of process established by Code § 8.01-329. At the same
time, Prosper filed an independent action pursuant to subsection
(D) of Code § 8.01-428 raising the same allegations and asking
for the same relief. The trial court held a single hearing to
consider both the motion and the independent action.
At the hearing, Prosper argued that VPI’s affidavit to the
Secretary of the Commonwealth for substituted service was
defective because it identified as Prosper’s last known address
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only one of the two addresses contained in the contract.
According to Prosper, identification of both addresses was
required under Code § 8.01-329(B). Therefore, according to
Prosper, the service of process was void ab initio and the trial
court did not have jurisdiction over Prosper when it entered the
default judgment order. Prosper also asserted that the failure
to list both addresses constituted fraud or fraud on the trial
court.
VPI responded that it met the requirements of Code § 8.01-
329 for service of process on Prosper and when the Certificate
of Compliance was filed, service on Prosper was complete and
conclusive. VPI argued that the address it specified in its
affidavit was the address listed in the notice provision of the
contract between the parties and was the address the parties had
used for correspondence and billing purposes during the contract
period. Therefore, VPI maintained that it met the requirements
of Code § 8.01-329(B) and was not required to list both
addresses. VPI also argued that it did not commit fraud or
fraud upon the trial court by listing only the single address in
its affidavit.
Following the argument of counsel, the trial court
determined that the order of default judgment should be set
aside stating that “due diligence in this instance, if there’s
two addresses, [service of process] should have been attempted
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at both addresses.” At a subsequent hearing to clarify the
basis for the ruling, the trial court stated that VPI “owed the
duty, based upon the size of this suit and the nature of the
suit, to try to serve both places” but that there was not
“necessarily any type of fraud . . . .” The trial court stated
that “people deserve their day in court” and that “it’s
fundamental fairness for everybody that we overturn that default
judgment, and . . . proceed on where this thing really ought to
go.” The trial court expressly declined to determine if the
order of default judgment should be set aside as void stating
“[w]hether it’s void or not, I don’t know.” The trial court
entered an order in the independent action setting aside the
order of default judgment for the reasons stated at the
hearings. The trial court also entered an order granting
Prosper’s motion to vacate the default judgment. The trial
court did not differentiate the grounds on which it vacated the
order of default judgment based on the nature of the proceeding
(i.e., the motion to vacate or the independent action to
vacate). VPI filed this appeal from the judgment entered in the
independent action.
Discussion
The issues raised in this appeal can be summarized as
follows: (1) whether the trial court erred in holding that
substituted service on the Secretary of the Commonwealth under
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Code § 8.01-329 was invalid because subsection (B) of that
statute required VPI to identify both Prospect’s physical and
post office box addresses as “the last known address of the
person to be served;” and (2) whether the trial court’s order
was deficient because it failed to articulate certain findings
required for vacating a default judgment in an action filed
pursuant to Code § 8.01-428(D).
1. Compliance with Code § 8.01-329(B)
We have repeatedly held that any material failure to comply
with the terms of the statute authorizing constructive service
invalidates the service and that any default judgment based upon
such service is void. O'Connell v. Bean, 263 Va. 176, 179, 556
S.E.2d 741, 742 (2002) (failure to check box in affidavit form to
incorporate the defendant’s last known address was a material
deviation from requirements of Code § 8.01-329 and thus service
was invalid); see also Khatchi v. Landmark Restaurant Assocs.,
237 Va. 139, 142, 375 S.E.2d 743, 745 (1989) (affidavit
defective and service invalid because plaintiff failed to
satisfy requirements of Code § 8.01-329(B) and indicate that
either the defendant was non-resident or foreign corporation or
after exercising due diligence, party to be served could not be
located). But see Basile v. American Filter Serv., Inc., 231
Va. 34, 38, 340 S.E.2d 800, 802 (1986)(failure to include
corporate defendant's zip code on affidavit did not invalidate
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service because omission of zip code could not result in
delivery to any location other than corporation's correct
address). Consequently, the issues which we must determine are
what the statute requires and whether VPI fulfilled those
requirements.
Code § 8.01-329(B) provides that a party seeking to secure
service of process on another party through serving the
Secretary of the Commonwealth shall execute an affidavit stating
either:
(i) that the person to be served is a nonresident or
(ii) that, after exercising due diligence, the party
seeking service has been unable to locate the person
to be served. In either case, such affidavit shall
set forth the last known address of the person to be
served.
(Emphasis added.)
VPI argues that, under the plain language of the
statute, a party complies with the statute by furnishing
a single address for service of process, even if a
plaintiff knows of more than one address for the person
to be served. Prosper contends that under principles of
statutory construction and constitutional due process,
the statute’s use of the word “the” rather than “a” when
referring to the last known address means that when more
than one address is known, all known addresses of the
party to be served must be provided.
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We have not previously been asked to construe this
provision in circumstances in which more than one current
address for the person to be served is known to the
plaintiff. “In construing statutes, courts are charged
with ascertaining and giving effect to the intent of the
legislature. That intention is initially found in the
words of the statute itself . . . .” Crown Cent.
Petroleum Corp. v. Hill, 254 Va. 88, 91, 488 S.E.2d 345,
346 (1997) (citation omitted). Accordingly, “[w]hen the
language of a statute is unambiguous, we are bound by the
plain meaning of that language.” Conyers v. Martial Arts
World of Richmond, Inc., 273 Va. 96, 104, 639 S.E.2d 174,
178 (2007). Where the legislature’s intent is not
evident from the language it enacted because the words it
used are amenable to more than one interpretation, “the
plain, obvious, and rational meaning of a statute is to
be preferred over any curious, narrow, or strained
construction.” Meeks v. Commonwealth, 274 Va. 798, 802,
651 S.E.2d 637, 639 (2007) (quoting Commonwealth v.
Zamani, 256 Va. 391, 395, 507 S.E.2d 608, 609 (1998))
(internal alteration omitted).
We reject Prosper’s construction of Code § 8.01-
329(B). The use of the definite article “the” coupled
with the singular form of the noun “address” reflects a
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legislative intent to serve process at a single address,
not multiple addresses. ∗
Prosper argues further, however, that application of
the statute to allow a plaintiff to “pick and choose, at
its sole discretion” among known addresses of the person
to be served “offends traditional notions of fair play and
substantial justice” and consequently is unconstitutional
under International Shoe Co. v. Washington, 326 U.S. 310(1945). We disagree.
In the context of substituted service, the due
process principles of fair play and substantial justice
concern the likelihood that the method chosen will inform
the party to be served of the pending litigation.
An elementary and fundamental requirement of
due process in any proceeding which is to be
accorded finality is notice reasonably calculated,
under all the circumstances, to apprise interested
parties of the pendency of the action and afford
them an opportunity to present their objections
. . . . [I]f with due regard for the practicalities
and peculiarities of the case these conditions are
reasonably met, the constitutional requirements are
satisfied.
. . . .
∗
Similarly, contrary to the trial court’s interpretation,
the statute does not reference the exercise of due diligence as
a method of selecting the last known address of the party to be
served. The statutory requirement of due diligence is imposed
only when the person to be served is a resident of the
Commonwealth whose location is unknown. Code § 8.01-329(B)(ii).
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The reasonableness and hence the constitutional
validity of any chosen method may be defended on the
ground that it is in itself reasonably certain to
inform those affected . . . or . . . that the form
chosen is not substantially less likely to bring home
notice than other of the feasible and customary
substitutes.
Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314-
15 (1950) (citations omitted); see also Virginia Lime Co. v.
Craigsville Distrib. Co., 670 F.2d 1366, 1368 (4th Cir. 1982).
The record in this case demonstrates that Prosper received
mail at the post office box address, that VPI mailed
correspondence by certified mail, return receipt requested, to
Prosper at the post office box address, that both the president
and general manager of Prosper received or signed the
certification of mailing accompanying correspondence from VPI,
and that Prosper used both the post office box address and the
physical address during its contractual relationship with VPI.
This evidence demonstrates that the address VPI identified on
the affidavit required by Code § 8.01-329(B) was reasonably
calculated to provide notice to Prosper of the pending
litigation and was not less likely to provide notice than other
feasible or customary substitutes.
The use of the post office box address in this case,
although one of two known to VPI, was not unconstitutional and
satisfied “the last known address” requirement of Code § 8.01-
329(B). Therefore the trial court’s determination that both
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addresses were required to comply with Code § 8.01-329(B) was
error and cannot be sustained as a basis for setting aside the
default judgment order. Because the relevant requirements of
Code § 8.01-329(B) were met in this case, service was complete
and actual notice of the proceeding was not required. Basile,
231 Va. at 38, 340 S.E.2d at 802.
2. Application of Code § 8.01-428(D)
VPI also argues that the trial court’s judgment vacating
the default decree in the action filed pursuant to Code § 8.01-
428(D) should be reversed because the court did not “articulate
a sufficient finding of cause” to support the judgment. We
agree.
Code § 8.01-428(D) provides:
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 set aside a judgment or decree for fraud
upon the court.
This provision does not create new rights or remedies and we
construe it narrowly to advance the principle of finality of
judgments. Charles v. Precision Tune, Inc., 243 Va. 313, 317,
414 S.E.2d 831, 833 (1992). The party seeking to set aside a
default judgment in an independent action brought pursuant to
what is now Code § 8.01-428(D) must prove each of the following
five elements:
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(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.
Id. at 317-18, 414 S.E.2d at 833. We have stated that when
setting aside the default judgment in an independent action, the
trial court must articulate “its consideration of and findings
with regard to all the necessary elements.” Ryland v. Manor
Care, Inc., 266 Va. 503, 510, 587 S.E.2d 515, 519 (2003). See
also Specialty Hosps. of Washington, LLC v. Rappahannock
Goodwill Industries, Inc., 283 Va. 348, 357, 722 S.E.2d 557, 561
(2012) (articulation of elements required to set aside default
judgment in action brought pursuant to Code § 8.01-428(D)).
The trial court in this case did not articulate its
consideration of or findings with regard to such elements as the
absence of an adequate remedy at law, whether Prosper had a good
defense to the underlying cause of action, and whether Prosper
was free of fault or negligence in the failure to receive the
notice.
Prosper argued that VPI’s failure to include both addresses
when it was aware of both addresses constituted fraud or fraud
on the court, however, the trial court specifically stated “I
don’t know that it was necessarily any type of fraud.” The
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trial court did not address accident or mistake. Accordingly,
the trial court erred in setting aside the order of default
judgment in the independent action brought pursuant to Code
§ 8.01-428(D) without identifying its findings on the necessary
elements of the action.
Conclusion
For the reasons stated, we will reverse the judgment of the
trial court vacating the order of default judgment in the
independent action brought pursuant to Code § 8.01-428(D) and
reinstate the final judgment against Prosper.
Reversed and final judgment.
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