Commonwealth of Virginia, Board for Contractors v. Michael Gavigan ( 2011 )

COURT OF APPEALS OF VIRGINIA
Present: Judges Frank, Humphreys and McClanahan
Argued by teleconference
COMMONWEALTH OF VIRGINIA,
BOARD FOR CONTRACTORS
MEMORANDUM OPINION * BY
v. Record No. 0921-10-3 JUDGE ELIZABETH A. McCLANAHAN
MARCH 22, 2011
MICHAEL GAVIGAN
FROM THE CIRCUIT COURT OF THE CITY OF LYNCHBURG
J. Leyburn Mosby, Judge
Steven P. Jack, Assistant Attorney General (Kenneth T. Cuccinelli,
II, Attorney General, on brief), for appellant.
A. David Hawkins (Overbey, Hawkins & Wright, on brief), for
appellee.
In this administrative appeal, the Commonwealth of Virginia’s Board for Contractors
(Board) challenges the order of the circuit court reversing the Board’s decision to deny Michael
Gavigan’s claim under the Virginia Contractor Transaction Recovery Act (CTRA), Code
§§ 54.1-1118 through -1127. The CTRA provides a limited means for payment to a claimant on
an unsatisfied judgment against a licensed contractor, the “regulant,” who has engaged in
“[i]mproper or dishonest conduct” in relation to a contract for residential construction. Code
§ 54.1-1118. Such payment is made from a fund administered by the Board, and is limited to
“actual monetary loss,” along with attorney’s fees and court costs, not to exceed a total of
$20,000, regardless of the amount of the claimant’s unsatisfied judgment. Code § 54.1-1123(A)
& (C).
*
Pursuant to Code § 17.1-413, this opinion is not designated for publication.
The Board argues the trial court erred in reversing its denial of payment to Gavigan
because his unsatisfied judgment—upon which he filed his CTRA claim for payment of damages
and attorney’s fees totaling $19,000—did not represent an award for “actual monetary loss,” as
required by Code § 54.1-1123, thus negating the judgment’s compensability under the CTRA. 1
We disagree and affirm the circuit court’s decision. Accordingly, we remand for the purpose of
ordering the Board to pay Gavigan the sum of $19,000 on his CTRA claim.
I. BACKGROUND
Gavigan entered into a written contract on March 2, 2006 with Larry Pippen, trading as
“Affordable Home Repairs,” for the construction of a basement apartment in Gavigan’s
Campbell County residence for the sum of $45,000. At that time, Pippen held a Class C
contractor’s license from the Board. After work under the contract began, Gavigan learned that
Pippen needed a Class B contractor’s license to do the construction, he became dissatisfied with
Pippen’s work, and he terminated the contract. Gavigan filed suit against Pippen in circuit court
for Pippen’s actions in relation to the contract.
In his complaint, Gavigan claimed Pippen’s actions constituted fraud, breach of contract,
and a violation of the Virginia Consumer Protection Act. Central to all of his claims were
allegations that, “[a]s a direct result of defendant’s poor workmanship and performance below
building code requirements, plaintiff [was] required to remove, rework and replace at great
expense much of what little defendant did accomplish” and that “[t]he defendant [had] not
earned and [was] not entitled to the moneys advanced to him, and the defendant . . . failed and
refuse[d] to return the plaintiff’s money to him.” Specifically as to his claim under the Virginia
1
In his CTRA claim filed with the Board, Gavigan also sought payment for his award of
court costs in his action against the licensed contractor, Larry Pippen, but Gavigan did not
include court costs in his appeal to the circuit court. Rather, he limited his challenge on appeal to
the Board’s denial of payment on his award for actual damages and attorney’s fees.
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Consumer Protection Act (Code §§ 59.1-196 through -207), Gavigan alleged that “[d]efendant
. . . misrepresent[ed] the nature and quality of the services offered to the plaintiff, knowingly and
intentionally” and that “[p]laintiff . . . rel[ied] on such misrepresentations to his detriment and
entered into a contract with the defendant that he never would have entered into absent the fraud
proximately resulting in damage to the plaintiff.” Gavigan then stated in his request for relief:
WHEREFORE, plaintiff prays that this Court find the
Defendant in violation of the Virginia Consumer Protection Act,
that the Defendant has committed actual fraud on the Plaintiff, that
the Defendant has committed constructive fraud on the Plaintiff,
that the Defendant breached his contract with the Plaintiff and that
judgment be awarded him [sic] against the Defendant in the
amount of $28,000.00, trebled as the law may allow to the sum of
$84,000.00, his attorneys fees incurred herein and his costs
incurred, all bearing interest from August 2, 2006 at the judgment
rate. Plaintiff also prays that this Court find such actions by the
Defendant as described herein constitute “improper or dishonest
conduct” as defined in Section 54.1-1118 of the Code of Virginia. 2
The circuit court ruled in Gavigan’s favor in his suit against Pippen, as set forth in the
court’s order entered on June 5, 2008. The order provided as follows:
The parties came hereto for trial on May 1, 2008. The
Court, having heard evidence, doth ADJUDGE, ORDER, and
DECREE that the Plaintiff shall recover on his claim under the
Virginia Consumer Protection Act and for improper conduct as set
out in § 54.1-1120(7) of the Code of Virginia. 3
2
Code § 54.1-1118 of the CTRA defines “[i]mproper or dishonest conduct” as
“includ[ing] only the wrongful taking or conversion of money, property or other things of value
which involves fraud, material misrepresentation or conduct constituting gross negligence,
continued incompetence, or intentional violation of the Uniform Statewide Building Code
(§ 36-97 et seq.). The term ‘improper or dishonest conduct’ does not include mere breach of
contract.”
3
Code § 54.1-1120(A)(7) states:
A claimant shall not be denied recovery from the [CTRA] Fund
due to the fact the order for the judgment filed with the verified
claim does not contain a specific finding of ‘improper or dishonest
conduct.’ Any language in the order which supports the
conclusion that the court found that the conduct of the regulant
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The Court doth enter judgment in favor of the Plaintiff
against the Defendant in the sum of $14,000.00 compensatory
damages and $5,000.00 attorney’s fees, with interest from the entry
of this Order, and all costs expended herein in the sum of $41.00.
Following unsuccessful efforts to satisfy his judgment against Pippen, Gavigan filed a
verified claim 4 with the Board, pursuant to the CTRA, seeking payment upon the judgment for
his actual damages in the sum of $14,000, and attorney’s fees in the sum of $5,000. 5
The Virginia Department of Professional and Occupational Regulation (Department)
conducted an investigation into Gavigan’s CTRA claim and held an “informal fact-finding
involved improper or dishonest conduct may be used by the Board
to determine eligibility for recovery from the Fund.
4
A claimant “verifie[s]” a claim under the CTRA by providing the Board certain
information regarding claimant’s efforts to satisfy the judgment upon which the claimant is
seeking payment from the Board. Code § 54.1-1120(A)(6).
5
Setting forth the general parameters for a CTRA claim, Code § 54.1-1120(A) states, in
relevant part:
Whenever any person is awarded a judgment in a court of
competent jurisdiction in the Commonwealth of Virginia against
any individual or entity which involves improper or dishonest
conduct occurring (i) during a period when such individual or
entity was a regulant and (ii) in connection with a transaction
involving contracting, the claimant may file a verified claim with
the [Board] to obtain a directive ordering payment from the Fund
of the amount unpaid upon the judgment subject to [certain
conditions and limitations].
A claimant is defined as “any person with an unsatisfied judgment involving residential
construction against a regulant, who has filed a verified claim under this Act.” Code
§ 54.1-1118. Code § 54.1-1120(A)(4) then states, in relevant part, that “[t]he claimant shall be
. . . an individual whose contract with the regulant involved contracting for the claimant’s
residence(s) located in the Commonwealth.” A regulant, in turn, is defined as including, among
others, “any individual . . . licensed by the Board for Contractors.” Code § 54.1-1118.
Further, pursuant to Code § 54.1-1123(A), “[t]he maximum claim of one claimant against
the [CTRA] Fund based upon an unpaid judgment arising out of the improper or dishonest
conduct of one regulant in connection with a single transaction involving contracting, is limited
to $20,000, regardless of the amount of the unpaid judgment of the claimant.”
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conference.” 6 A Board member conducted the hearing and received documentary evidence from
the Department, Gavigan, and Pippen, and heard testimony from both Gavigan and Pippen. The
Board member subsequently issued a report to the full Board containing a summary of the
hearing, her findings of fact, and her recommendation to the Board to deny the claim. In support
of the recommendation, the Board member found, inter alia, the following: (i) the money paid
to Pippen under his contract with Gavigan for the construction of the basement apartment at
Gavigan’s residence came from Gavigan’s mother-in-law, not Gavigan; and (ii) Gavigan’s claim
included a request for “reimbursement of [his] personal time” expended toward “complet[ing]
the project”; and (iii) Gavigan’s circuit court judgment was not an award of damages
“constitut[ing] actual monetary loss to [him],” as required by Code § 54.1-1123(C) to establish a
compensable claim under the CTRA. A majority of the Board voted to accept the Board
member’s findings and recommendation, and entered an order on October 6, 2009 denying
Gavigan’s claim.
Gavigan appealed the Board’s decision to the circuit court, asserting the decision was
“not supported by substantial evidence,” and “not within the scope of legal authority of the
[Board].” On the record presented, Gavigan argued, the Board had a duty to “issue a directive
ordering payment [to him] from the fund,” as provided under Code § 54.1-1122, because he had
complied with the requirements of the CTRA and presented a compensable claim for payment of
6
The Board is a separate agency within the Department, and the Department conducts
investigations in matters involving the various agencies under its authority. Code
§ 54.1-1122(A) specifically authorizes the Department to conduct an “informal fact-finding
conference pursuant to § 2.2-4019 of the Administrative Process Act (§ 2.2-4000, et seq.)” when
considering a claimant’s verified claim under the CTRA; and Code § 54.1-1122(B) provides that,
“[i]f the Board finds there has been compliance with the required conditions, the Board shall
issue a directive ordering payment from the fund to the claimant the amount remaining unpaid on
the judgment, subject to the limitations set forth in § 54.1-1123.”
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$14,000 for actual monetary loss, and $5,000 in attorney’s fees, on his unsatisfied judgment
against Pippen.
In response, the Board argued it made a finding that “no amount of Gavigan’s judgment
constituted actual monetary loss to Gavigan” because “Gavigan’s mother-in-law . . . paid for the
work performed by Pippen,” and the court was bound by that finding, which negated Gavigan’s
claim.
By order dated April 8, 2010, the circuit court reversed the Board’s decision and ordered
the matter remanded to the Board for payment to Gavigan. As explained in the order, the court
determined from the record presented on appeal that Gavigan’s unsatisfied judgment from the
underlying litigation against Pippen did “not present interest, punitive damages, exemplary
damages, or any amounts that [did] not constitute actual monetary loss to [Gavigan].” The court
further determined that the judgment represented an award for (i) actual monetary loss in the sum
of $14,000, described in the judgment as “compensatory damages,” arising from Pippen’s
“improper conduct” as defined in the CTRA, and (ii) attorney’s fees in the sum of $5,000, both
of which sums were compensable under the CTRA. Also, the court specifically rejected the
Board’s conclusion that Gavigan did not suffer any loss under his contract with Pippen based on
the Board’s finding that Gavigan’s in-laws, and not Gavigan, paid Pippen. The court concluded
the evidence was undisputed that “the in-laws were providing financing only.” In other words,
“[t]hey were acting as the bank for construction financing, but the house belonged to Gavigan.”
The Board’s appeal to this Court followed.
II. ANALYSIS
A.
The Virginia Administrative Process Act authorizes judicial review of agency decisions.
See Code § 2.2-4027. Under settled principles, the burden is upon the party appealing such a
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decision to demonstrate error. Avante at Roanoke v. Finnerty, 56 Va. App. 190, 197, 692 S.E.2d
277, 280 (2010); Carter v. Gordon, 28 Va. App. 133, 141, 502 S.E.2d 697, 700-01 (1998). “Our
review is limited to determining (1) ‘[w]hether the agency acted in accordance with law;’
(2) ‘[w]hether the agency made a procedural error which was not harmless error;’ and
(3) ‘[w]hether the agency had sufficient evidential support for its findings of fact.’” Avante at
Roanoke, 56 Va. App. at 197, 692 S.E.2d at 280 (quoting Johnston-Willis, Ltd. v. Kenley, 6
Va. App. 231, 242, 369 S.E.2d 1, 7 (1988)).
On factual issues, the determination to be made by the reviewing court is “‘whether
substantial evidence exists in the agency record to support the agency’s decision. The reviewing
court may reject the agency’s findings of fact only if, considering the record as a whole, a
reasonable mind would necessarily come to a different conclusion.’” John Doe v. Virginia Bd.
of Dentistry, 52 Va. App. 166, 175, 662 S.E.2d 99, 103 (2008) (quoting Johnston-Willis, Ltd., 6
Va. App. at 242, 369 S.E.2d at 7). See Virginia Real Estate Comm’n v. Bias, 226 Va. 264, 269,
308 S.E.2d 123, 125 (1983) (“The phrase ‘substantial evidence’ refers to ‘such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion.’” (quoting Consolidated
Edison Co. v. NLRB, 305 U.S. 197, 229 (1938))).
However, “[a]n agency’s legal interpretations of statutes is accorded no deference
because we have long held that pure statutory interpretation is the prerogative of the judiciary,
and thus, Virginia courts do not delegate that task to executive agencies.” Commonwealth ex rel.
Va. State Water Control Bd. v. Blue Ridge Envtl. Def. League, Inc., 56 Va. App. 469, 481, 694
S.E.2d 290, 296 (2010) (citations and internal quotation marks omitted); see Virginia Dep’t of
Health v. NRV Real Estate, LLC, 278 Va. 181, 185, 677 S.E.2d 276, 278 (2009) (“Although
decisions by administrative agencies are given deference when they fall within an area of the
agency’s specialized competence, issues of statutory interpretation fall outside those areas and
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are not entitled to deference on judicial review.” (citation omitted)). Accordingly, we conduct a
de novo review of the agency’s interpretation of the statutes in dispute. Id.
B.
Code § 54.1-1123(C) of the CTRA states:
Excluded from the amount of any unpaid judgment upon which a
claim against the [CTRA] Fund is based shall be any sums
representing interest, or punitive or exemplary damages, or any
amounts that do not constitute actual monetary loss to the
claimants. Such claim against the Fund may include court costs
and attorney’s fees.
The Board argues the circuit court erred in concluding that Gavigan’s award of
“compensatory damages” in the sum of $14,000, as set forth in his unsatisfied judgment from the
underlying litigation, constituted an award for “actual monetary loss” under Code
§ 54.1-1123(C). According to the Board, it was entitled, through its informal fact-finding
proceeding, to make an independent assessment of Gavigan’s action against Pippen resulting in
the unsatisfied judgment, and its findings from that proceeding supported its determination that
Gavigan suffered no actual monetary loss arising from Pippen’s improper or dishonest conduct
in relation to his residential construction contract with Gavigan. From our review of Gavigan’s
action against Pippen, we reject the Board’s argument and conclude the circuit court correctly
determined that Gavigan’s judgment for “compensatory damages” constituted an award for
actual monetary loss.
The Board is correct in asserting that an award for “compensatory damages” may include
certain damages in addition to, or apart from, actual monetary loss. “Actual or compensatory
damages, the terms being synonymous, are damages in satisfaction of, or in recompense for, loss
or injury sustained. Either term covers all loss recoverable as a matter of right and includes all
damages other than punitive or exemplary damages.” News Leader Co. v. Kocen, 173 Va. 95,
108, 3 S.E.2d 385, 391 (1939) (citation and internal quotation marks omitted). See Fleming v.
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Moore, 221 Va. 884, 894, 275 S.E.2d 632, 638-39 (1981) (holding that actual or compensatory
damages include both pecuniary and non-pecuniary damages); see also Bohac v. Dep’t of Agric.,
239 F.3d 1334, 1341 (Fed. Cir. 2001) (“It is well-established that the term ‘compensatory
damages’ includes non-pecuniary damages such as pain and suffering.”).
It is also true, however, that “‘no court can base its judgment or decree upon facts not
alleged or upon a right which has not been pleaded and claimed.’” Board of Supervisors v.
Robertson, 266 Va. 525, 537-38, 587 S.E.2d 570, 578 (2003) (quoting Ted Lansing Supply Co.
v. Royal Aluminum & Constr. Corp., 221 Va. 1139, 1141, 277 S.E.2d 228, 229 (1981)); see
Potts v. Mathieson Alkali Works, 165 Va. 196, 207, 181 S.E. 521, 525 (1935)). Therefore, “‘[a]
litigant’s pleadings are as essential as his proof, and a court may not award particular relief
unless it is substantially in accord with the case asserted in those pleadings.’” Robertson, 266
Va. at 538, 587 S.E.2d at 578 (quoting Jenkins v. Bay House Assoc., 266 Va. 39, 43, 581 S.E.2d
510, 512 (2003)). Furthermore, “[c]ourts are presumed to act in accordance with the law and
orders of the court are entitled to a presumption of regularity.” Napert v. Napert, 261 Va. 45, 47,
540 S.E.2d 882, 884 (2001) (citing Beck v. Semones’ Adm’r, 145 Va. 429, 442, 134 S.E. 677,
681 (1926)).
In his complaint against Pippen, Gavigan alleged facts only in the nature of actual
monetary loss arising from Pippen’s alleged improper or dishonest conduct in relation to the
residential construction contract, as contemplated by the CTRA. More specifically, Gavigan
alleged that, as a result of such wrongful conduct by Pippen, as defined in Code § 54.1-1118,
Gavigan was required to “remove, rework and replace at great expense much of what little
[Pippen] accomplish[ed]” and that Pippen had “not earned and [was] not entitled to the moneys
advanced to him,” but he “failed and refuse[d] to return [Gavigan’s] money to him.” Thus,
based on those allegations, the trial court’s award of $14,000 in “compensatory damages” to
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Gavigan, as set forth in his unsatisfied judgment, was presumptively limited to an award for
actual monetary loss—i.e., an award “substantially in accord with the case asserted in
[Gavigan’s] pleadings.” Robertson, 266 Va. at 538, 587 S.E.2d at 578 (citation and internal
quotation marks omitted). And there is nothing in the record from the underlying litigation to
indicate the award was for any other kind of loss or damage. 7 In addition, as expressly stated in
the judgment, the trial court found that Gavigan’s damages arose from the kind of “improper
conduct” the CTRA was designed to redress.
While the Board is authorized under Code § 54.1-1122 of the CTRA to conduct an
informal fact-finding conference to determine whether a claimant has qualified for payment on
an unsatisfied judgment, the Board is not entitled under the CTRA to ignore or otherwise reject a
circuit court’s findings in the underlying litigation, as the Board has done in the instant case.
7
The Board essentially contends the CTRA is limited to payment for restitutionary type
damages in the form of “out-of-pocket loss.” See Baylor Univ. v. Sonnichsen, 221 S.W.3d 632,
636 (Tex. 2007) (explaining that an award of “[o]ut-of-pocket damages” derives from a
“restitutionary theory”). If so, the payment would only be for the purpose of “restor[ing] to
[claimant] any benefit that he has conferred on the other party.” 24 Richard A. Lord, Williston
on Contracts § 64:2, at 21 (4th ed. 2002). See 1 Dan B. Dobbs, Law of Remedies § 3.1, at 278
(2d ed. 1993) (“Damages differs from restitution in that damages is measured by the plaintiff’s
loss; restitution is measured by the defendant’s unjust gain.”). That is not our reading of the
CTRA. The legislature did not use the term “restitution” anywhere in this statutory scheme, as it
has in other statutes. See, e.g., Code § 6.2-1626 (authorizing Attorney General to seek “damages
and such other relief allowed by law, including restitution to the extent available to borrowers,”
in the context of certain actions against mortgage lenders and brokers); Code § 8.2-718 (setting
forth under the Uniform Commercial Code buyer’s right to “restitution” of sums paid to seller
who has withheld delivery of goods); Code § 59.1-508.9 (setting forth under the Uniform
Computer Information Transactions Act licensee’s right to damages for breach of contract “plus
restitution”). Instead, under Code § 54.1-1123(C) of the CTRA, the legislature provided for
payment “constituting actual monetary loss to the claimants.” We thus view this payment on
claimant’s unsatisfied judgment as compensation for claimant’s “‘reliance interest,’ which is his
interest in being reimbursed for loss caused by reliance on the contract [with the “regulant,” i.e.,
the bad contractor] by being put in as good a position as he would have been in had the contract
not been made.” 24 Williston § 64:2, at 21. As such, we further note that this does not include
reimbursement for claimant’s “‘expectation interest,’” meaning his interest in receiving the
“benefit of his bargain by being put in as good a position as he would have been in had the
contract been performed.” Id.
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Had the legislature intended to allow the Board to exercise such discretion, it could have done so,
but did not. See Hollowell v. Va. Marine Res. Comm’n, 56 Va. App. 70, 89, 691 S.E.2d 500,
510 (2010) (“[H]ad the legislature intended to give the VMRC unlimited power to prohibit crab
dredging for multiple seasons at a time without the necessity of further action or public hearings
. . . it would have done so by using very plain simple language to that effect.” (internal quotation
marks omitted)); Reynolds v. Commonwealth, 30 Va. App. 153, 160, 515 S.E.2d 808, 811-12
(1999) (“If the legislature had intended that operators undergo a forty-hour training program for
each individual type of breath test equipment, then it would have said so in the statute.”). That is
not to say the Board is without authority to take evidence on the issue of damages and make
independent findings of fact when the exact nature of the damage award recited in the unsatisfied
judgment cannot be determined on the record from the circuit court. However, that is not the
case here.
III. CONCLUSION
For the reasons stated above, we affirm the circuit court in its reversal of the Board’s
decision denying Gavigan’s CTRA claim on his unsatisfied judgment from the underlying
litigation. We further remand this case to the circuit court and order that it be remanded to the
Board with the directive to pay Gavigan the sum of $14,000 in damages for actual monetary loss,
and the sum of $5,000 for attorney’s fees, from the CTRA fund.
Affirmed and remanded.
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