Case Title: Specialty Hosps. v. Rappahannock Goodwill Indus.

Citation: 

Docket Number: 102196

State: virginia

Court: Virginia Supreme Court

Date: 2012-03-02T00:00:00Z

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