UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CAPITAL HAULING, INCORPORATED, 

Plaintiff-Appellee,

v.

DAVID HAROLD FORBES, SR.,  No. 01-2329 Defendant-Appellant,

and

LUCILLE PATRICIA FORBES,

Defendant. 

Appeal from the United States District Court

for the Eastern District of Virginia, at Richmond.

Robert E. Payne, District Judge.

(CA-01-237, BK-98-39487)

Argued: September 25, 2002

Decided: September 17, 2003

Before WIDENER, LUTTIG, and WILLIAMS, Circuit Judges.

Reversed and remanded by unpublished per curiam opinion. Judge

Widener wrote a dissenting opinion. 

COUNSEL

ARGUED: Richard Stephens Clinger, Richmond, Virginia, for

Appellant. Brian R.M. Adams, SPOTTS, FAIN, CHAPPELL &

ANDERSON, P.C., Richmond, Virginia, for Appellee. ON BRIEF:
Deanna H. Hathaway, SPOTTS, FAIN, CHAPPELL & ANDERSON,

P.C., Richmond, Virginia, for Appellee. 

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). 

OPINION

PER CURIAM: 

On August 31, 1998, pursuant to a warrant in debt filed by appellee

Capital Hauling, Inc., and after Lucille Forbes and appellant David

Forbes, Sr., failed to appear, the Richmond City General District

Court entered a default judgment against appellant. In appellant’s subsequent bankruptcy proceeding, Capital Hauling contended that the

debt arising from the default judgment could not be discharged as it

arose from fraud. See 11 U.S.C. § 523(a)(2)(A); 11 U.S.C.

§ 523(a)(4). Capital Hauling moved for summary judgment, arguing

that the default judgment collaterally estopped appellant from litigating the issue of fraud. The bankruptcy court agreed with Capital Hauling and granted summary judgment, and the district court affirmed.

Appellant now appeals. 

When determining whether collateral estoppel arises from a prior

state court judgment, federal courts apply the law of the state in

whose courts the prior judgment was entered. See In re Ansari, 113

F.3d 17, 19 (4th Cir. 1997). Under Virginia law, a default judgment

can create collateral estoppel, but all the requirements of collateral

estoppel must still be satisfied; in particular, "the factual issue sought

to be litigated actually must have been litigated in the prior action."

TransDulles Center, Inc. v. Sharma, 252 Va. 20, 22-23 (1996). In the

instant case, there is nothing in the record establishing that "testimonial and documentary evidence was presented" in the state court proceeding, or that "proof was presented" of any kind as to whether

appellant committed fraud, or indeed that anything occurred at all at

the state court trial other than the entry of a money judgment. Id. at

24. Thus, for example, in TransDulles: 

2 CAPITAL HAULING v. FORBES
[T]he tenant’s personal liability for rent and other charges,

including attorney’s fees, under the lease actually was litigated in the prior action. Testimonial and documentary evidence was presented ex parte in the district court hearing.

The circuit court record established that proof was presented

in the district court through a bookkeeper for the landlord

and through the landlord’s attorney, who presented the lease

and other documents including an affidavit supporting the

attorney’s fees claimed. 

Id. 

Since there was no evidence that the issue of fraud was actually litigated in the state court proceeding, the bankruptcy court erred by

finding that appellant was collaterally estopped from litigating this

issue, and hence we reverse the grant of summary judgment.

REVERSED AND REMANDED

WIDENER, Circuit Judge, dissenting: 

I respectfully dissent. 

Because the majority opinion does not mention facts critical to the

outcome in this case, a brief recount of them is in order. Defendant

David H. Forbes served as stockholder, director, and president of

Capital Hauling until 1998. JA 7. David Forbes’s wife and codefendant, Lucille Patricia Forbes, served as secretary of Capital

Hauling. JA 8. On April 3, 1998, Capital Hauling filed a civil warrant

in debt for $15,000 in the Richmond City General District Court

charging the Forbes with conversion of corporate funds, breach of

fiduciary duty, and fraud. JA 64. The return date on the warrant was

set for May 19, 1998. JA 64. 

The Forbes appeared on May 19, 1998, denied the claims asserted

by Capital Hauling, and requested trial. JA 29 & 64. The case was set

for trial for August 31, 1998 at 1:00 p.m. JA 64. The state court

ordered Capital Hauling to file a bill of particulars and the Forbes to

file grounds of defense within 21 days. JA 64. Although Capital HaulCAPITAL HAULING v. FORBES 3
ing filed its bill of particulars on June 9, 1998, consisting of 17 pages

including exhibits (JA 64; 34-38), the Forbes did not file grounds of

defense. (JA 64) 

On August 31, 1998, the state court called the case for trial at 1:00

p.m. When the Forbes failed to appear as scheduled, the state court

entered judgment against them at 1:15 p.m. for $15,000, the sum sued

for. JA 64. Forbes acknowledges that the state court default judgment

was entered prior to their arrival at court an hour and a half after the

scheduled trial. Blue br. p. 3. The Forbes filed a motion for rehearing,

which the general district court denied on September 9, 1998. JA 64

& 29. The Forbes did not appeal and the judgment became final. 

On December 22, 1998, the Forbes filed for Chapter 13 bankruptcy

protection in the United States Bankruptcy Court for the Eastern District of Virginia. JA 6. On April 20, 2000, on petition by the Forbes,

the bankruptcy court converted the filing into a Chapter 7 bankruptcy

proceeding. JA 5. 

On July 21, 2000, Capital Hauling filed a complaint to determine

dischargeability of debt. Capital Hauling maintained that the state

court judgment on the warrant in debt was exempted from bankruptcy

discharge pursuant to 11 U.S.C. § 523(a). JA 7. On March 12, 2001,

the bankruptcy judge relied on the bill of particulars and granted Capital Hauling’s motion for summary judgment as to David Forbes,

holding that the judgment on the warrant in debt was excepted from

bankruptcy discharge pursuant to 11 U.S.C. § 523(a)(2)(A) and

§ 523(a)(4). JA 3, 73-76. The bankruptcy court, however, denied Capital Hauling’s motion as to Mrs. Forbes. JA 73, 76. On appeal the district court affirmed the decision of the bankruptcy court in all

respects. JA 111. David Forbes filed his notice of appeal on November 6, 2001. JA 113. 

In my opinion the state court judgment on the warrant in debt

obtained by Capital Hauling against the Forbes was based solely on

nondischargeable causes of action, conversion and fraud by a corporate officer. While the "basis of this claim" stated in the warrant in

debt initiating the suit was "conversion of corp. funds; breach of fiduciary duty; fraud," JA 64, the bill of particulars filed by Capital Hauling on June 9, 1998, stated claims only for fraud and conversion by

4 CAPITAL HAULING v. FORBES
a corporate officer. JA 34-38. Capital Hauling attached to the bill of

particulars corroborating exhibits A through G containing the directors’ resolutions and subscription lists for capital stock, illustrating

that Capital Hauling was asserting a fraud charge in the bill of particulars. JA 39-50. 

A bill of particulars has been a pleading in Virginia for some 52

years. "All bills of particulars and motions in writing are pleadings."

Miller v. Grier S. Johnson, Inc., 62 S.E.2d 870, 875 (Va. 1951) (quoting Rules of Court). As a pleading, a proper function of a bill of particulars is to "limit the issues and narrow the proofs." Eubank v.

Spencer, 128 S.E.2d 299, 301 (Va. 1962). A bill of particulars "enable[s] the parties to prepare more intelligently for trial and prevent

surprise, by limiting them to proof of the particular matters therein set

out." West v. Anderson, 42 S.E.2d 876, 880 (Va. 1947). Accordingly,

when the state court trial judge called the case for trial, only the fraud

and conversion claims were asserted against the Forbes because the

initial warrant in debt had been limited by the bill of particulars which

omitted the claim for breach of fiduciary duty. In fact, David Forbes

concedes in his brief to this court that the bill of particulars states a

claim for fraud. See Forbes Initial Br. at 3 ("Capital Hauling subsequently filed a bill of particulars alleging fraud on the part of Forbes

and Lucille P. Forbes."). Forbes’ admission acknowledges that the bill

of particulars narrowed the complaint, and therefore the state court

action on the warrant in debt was limited to claims for fraud and conversion by an officer of a corporation. 

In a negligence case with facts similar to those present here, one

of the defendants, although served with process, did not file responsive pleadings. The effect of the failure was described by the Virginia

Supreme Court as follows:

The failure of Million to plead responsively to the plaintiff’s

motion for judgment was an admission that the plaintiff was

entitled to recover some damages from him. Inherent in that

admission was the acknowledgment by Million of the negligence charged against him as proximately causing the collision and the concession that the deceased was free of

contributory negligence. 

CAPITAL HAULING v. FORBES 5
Thus, under the circumstances of this case, the only issue

before the trial court when it acted upon the plaintiff’s

motion for default was the amount of damages to be

awarded . . . .

Funkhouser v. Million, 161 S.E.2d 725, 729 (Va. 1968). The effect of

the Forbes’ failure to file responsive pleadings and to appear in this

case must be the same as the failure to file responsive pleadings in the

Funkhouser case. Like the plaintiff in Funkhouser, the Forbes have

admitted the charges asserted in the default judgment action and a

valid judgment based on fraud and conversion has been entered. 

As to the effect of the judgment on subsequent proceedings, the

Virginia Supreme Court has refused to create a blanket exemption for

default judgment in collateral estoppel cases. In Transdulles, the Virginia Supreme Court stated that "a final default judgment ‘imports

absolute verity, and is as effectual and binding as if pronounced upon

a trial upon the merits.’" 472 S.E.2d at 276. The Transdulles court

held that collateral estoppel was applicable to the default judgment in

question, and the Transdulles defendant was precluded from contesting liability based on a default judgment entered against him in a prior

proceeding. Transdulles, 472 S.E.2d at 275-76. 

While the majority takes the position that in order for the case to

be actually litigated, the record must show that "‘testimonial and documentary evidence was presented’" or "‘proof was presented’" of any

kind," slip, p. 2, or something "other than the entry of a money judgment," slip, p. 2, occurred in the state court trial, an issue is actually

litigated and collateral estoppel applies if a party had a "full and fair

opportunity to litigate" the issue and the issue was determined by a

court. Allen v. McCurry, 449 U.S. 90, 95 (1980) (emphasis added);

see also In re McNallen, 62 F.3d 619, 624 (4th Cir. 1995). Transdulles rejects the argument that the holding in Horton v. Morrison, 448

S.E.2d 629 (Va. 1994), adopted a blanket exemption for collateral

effect of default judgments. The Transdulles court distinguished Horton because the question of Horton’s negligence became moot when

the claim made against Morrison by the passenger of Horton’s vehicle

was dismissed with prejudice, and therefore, Morrison’s claim for

contribution against Horton became moot. Accordingly, the issue of

Horton’s negligence was not decided by the default judgment. Trans6 CAPITAL HAULING v. FORBES
dulles, 472 S.E.2d at 276-77. While it is certainly true that the taking

of evidence on a question may tend to show that the question is litigated, it is just as true that the fact that the default judgment in Transdulles was entered after the entry of testimonial and documentary

evidence does not mean that taking of evidence is required to give

default judgments preclusive effect. Cf. Hagans v. Lavine, 415 U.S.

528, 533-35, n.5 (1974) (the fact that a thing has been done in litigation is not authority for the proposition that it must be done). 

In Transdulles, the Virginia Supreme Court explicitly rejected the

view espoused by the Restatement (Second) of Judgments that default

judgments are not actually litigated. Transdulles, 252 Va. at 23. The

Virginia court stated, "We do not agree with the . . . view typified by

the Restatement comment" that "in ‘the case of judgment entered by

. . . default, none of the issues is actually litigated.’" Transdulles, 252

Va. at 23 (quoting Restatement Second of Judgments, § 27 cmt. e).

By explicitly rejecting the view of the Restatement, the Virginia

Supreme Court has certainly accepted and all but explicitly adopted

the full and fair opportunity definition of actually litigated used by the

United States Supreme Court. Thus collateral estoppel should apply

to this default judgment since the parties had a full and fair opportunity to litigate the issue. As noted, Forbes even admits in his brief in

this court the bill of particulars alleged fraud. See Brief at 3. See

Allen v. McCurry, 449 U.S. at 95. The majority, however, uses a view

of default judgments much like that of the Restatement, which was

rejected in Transdulles, to hold that this case was not actually litigated. 

The position advanced by the majority calls into question the finality and certainty of a default judgment and contrary to Virginia law

does not afford default judgments the same dignity and respect given

to other judicial proceedings. David Forbes was provided a full and

fair opportunity to litigate the issues in question, and he should not

be permitted to argue that the issues were not litigated because he

failed to avail himself of the opportunity. 

Therefore, the only other issue left for resolution in this case is

whether the basis of the debt—i.e. grounded on dischargeable or nondischargeable acts—was actually litigated. Transdulles, 472 S.E.2d at

275. The warrant in debt, which was originally issued on the theory

CAPITAL HAULING v. FORBES 7
of three causes of action, was subsequently limited to two causes of

action by the bill of particulars stating claims only for fraud and conversion by a corporate officer. Therefore, when the Virginia general

district court judge decided the case, judgment could only have been

based on either conversion or fraud. Unlike mere breach of fiduciary

duty which may be a dischargeable act only under certain circumstances, see R.E. Am. v. Garver (In re Garver), 116 F.3d 176, 178-80

(6th Cir. 1997) (concluding that common law breach of fiduciary

duty, without more, insufficient to preclude discharge of debt under

§ 523(a)(4)); Fowler Bros. v. Young (In re Young), 91 F.3d 1367,

1372 (10th Cir. 1996) (stating that breach of "general fiduciary duty

of confidence, trust, loyalty, and good faith . . . [in]sufficient to establish a fiduciary relationship for purposes of dischargeability"), judgments based on such fraud or conversion, as here, are both

nondischargeable under the bankruptcy code. 11 U.S.C. § 523(a)(4)

(stating "fraud or defalcation while acting in a fiduciary capacity,

embezzlement, or larceny" not dischargeable); 11 U.S.C.

§ 523(a)(2)(A) (exempting money or property obtained by false pretenses from discharge). Because the judgment could have been based

only on conversion or fraud by a corporate officer, both of which are

nondischargeable in bankruptcy, the question of whether the debts are

based on nondischargeable acts has been actually litigated in the prior

state proceedings. 

Especially when we consider that 945,810 civil cases were filed in

the General District Courts in Virginia in 2002,1 the reason is patent

for the rule of the Supreme Court of the United States that a "full and

fair opportunity to litigate" is the equivalent of actual litigation, and

the corresponding and similar rejection by the Supreme Court of Virginia of the Restatement rule that "[i]n the case of a judgment entered

by . . . default, none of the issues is actually litigated." While I do not

suggest that all of the 945,810 cases in the General District Courts

end up in the bankruptcy and district courts of the United States, a

significant number of them do, as all of us know. People who seek

the protection of the bankruptcy laws are people who have judgments

against them. A re-trying of a significant number of those cases under

the procedure required by the majority decision would destroy much

of the efficacy of default judgments which have been upheld by both

1Virginia, State of the Judiciary Report, 2002. 

8 CAPITAL HAULING v. FORBES
of those courts of last resort in, e.g., Riehle v. Margolies, 279 U.S.

218 (1929); Transdulles, 472 S.E.2d at 276; Neal v. Utz, 75 Va. 480,

488 (1881). 

Especially when a case is handled as carefully as this one was by

the judge of the General District Court,2 no reason is suggested to relitigate the judgment. 

Even the quotation on page 3 of the slip opinion of the majority is

not a complete quotation and omits the holding of the case which is

entirely consistent with my dissent. The omitted part of the majority’s

quotation follows:

We disagree with the tenant’s argument that before an issue

may be "actually litigated" in a court proceeding, the defendant must personally appear at the hearing and contest the

matter. Indeed, this Court has said that a final default judgment "imports absolute verity, and is as effectual and binding as if pronounced upon a trial upon the merits." [citing]

Neale v. Utz, 75 Va. 480, 488 (1881). (Italics added.)

2Even the suggestion by Forbes as to the ascertainment of damages,

which is not contested, Brief, p. 10, seems to have been followed by the

General District Court judge. See Rule 7B:9(c) of General District Court

Civil Rules. 

CAPITAL HAULING v. FORBES 9