Title: Va. Builders' Supply v. Brooks & Co.
Citation: N/A
Docket Number: 941686
State: Virginia
Issuer: Virginia Supreme Court
Date: September 15, 1995

Present:  Carrico, C.J., Compton, Stephenson, Whiting,
* Lacy, 
Hassell and Keenan, JJ. 
 
VIRGINIA BUILDERS' SUPPLY, INC. 
 
 
OPINION BY JUSTICE A. CHRISTIAN COMPTON 
v.  Record No. 941686                September 15, 1995 
 
BROOKS & CO. GENERAL CONTRACTORS, INC. 
 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND 
 
Melvin R. Hughes, Jr., Judge 
 
 
In this creditors' rights controversy, the question 
presented is whether a garnishee, after being served with the 
summons in garnishment, may commence arbitration with the 
judgment debtor while excluding the judgment creditor from the 
arbitration, obtain default relief against the judgment debtor, 
and then bind the judgment creditor to the result of the 
arbitration.  We answer that query in the negative, and will 
reverse the judgment of the trial court. 
 
The facts are undisputed.  On June 29, 1993, appellant 
Virginia Builders' Supply, Inc., a wholesale supplier of building 
materials, obtained a judgment in the court below against 
DeGaetani & Sons Drywall, Inc., a drywall subcontractor, in the 
principal sum of $49,614.17.  The judgment order provided for 
immediate rights of execution.  Code § 8.01-466. 
 
On July 8, 1993, a summons in garnishment in the amount of 
the judgment, plus interest and costs, was issued in behalf of 
the judgment creditor against the judgment debtor naming appellee 
                     
     
*Justice Whiting participated in the hearing and decision of 
this case prior to the effective date of his retirement on 
August 12, 1995. 
 
 
 
 
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Brooks & Co. General Contractors, Inc., garnishee, returnable 
October 1, 1993.  The garnishee was served on July 19, 1993.  The 
judgment creditor sought to obtain from the garnishee sums 
believed to be due from the garnishee to the judgment debtor 
under several written contracts on construction projects in which 
the judgment debtor was the garnishee's subcontractor.  Those 
contracts contained clauses providing for resolution of any 
disputes between the contracting parties by mandatory arbitration 
under the "Construction Industry Arbitration Rules of the 
American Arbitration Association." 
 
On September 1, 1993, the garnishee invoked the dispute 
resolution process by filing a Demand For Arbitration against the 
judgment debtor.  The garnishee alleged that the judgment debtor 
owed the garnishee more money than it owed the judgment debtor.  
On or about September 27, the garnishee filed a motion in the 
trial court seeking a stay of the garnishment proceeding pending 
completion of the arbitration. 
 
On October 1, the return day of the garnishment, attorneys 
for the judgment creditor and garnishee appeared in the trial 
court; the judgment debtor, although served, never responded to 
the garnishment summons.  The judgment creditor did not object to 
the stay, and the court continued the garnishment proceeding 
generally. 
 
Subsequently, the judgment creditor sought to intervene in 
the arbitration.  A representative of the American Arbitration 
 
 
 
 
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Association advised it had no procedure to allow intervention 
absent consent of the garnishee or a court order.  The garnishee 
refused to allow the judgment creditor to participate in the 
arbitration.  Later, the garnishee presented proof to an 
arbitrator in the absence of the judgment creditor and judgment 
debtor, and obtained an award dated November 19, 1993 deciding 
that it owed the judgment debtor nothing. 
 
In December 1993, the judgment creditor sought a hearing in 
the trial court to present evidence on the amount of the 
garnishee's liability under the garnishment.  In February 1994, 
the garnishee filed a motion to dismiss the garnishment upon the 
ground that it owed nothing to the judgment debtor according to 
the arbitration award. 
 
Subsequently, the trial court granted the motion to dismiss, 
ruling "that the garnishee owes nothing to the judgment debtor, 
in view of the arbitration results; and that accordingly, the 
garnishee has no obligation to the" judgment creditor.  We 
awarded the judgment creditor this appeal from the trial court's 
July 1994 dismissal order to consider the foregoing question. 
 
On appeal, the judgment creditor points out that it sought 
to determine, through the garnishment proceeding, the amount owed 
by the garnishee to the judgment debtor, and that the garnishee, 
through the arbitration proceeding, also sought a ruling on this 
issue.  The judgment creditor states that before the results of 
one proceeding can be binding in another, there must be an 
 
 
 
 
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identity of parties between the two actions.  Here, according to 
the judgment creditor, there is no identity of parties, and hence 
no preclusion of issues or claims, because the garnishee excluded 
the judgment creditor from the arbitration. 
 
The judgment creditor says that the garnishment summons acts 
as an involuntary assignment of the judgment debtor's rights to 
the judgment creditor.  See Crane v. Standard Lumber & Mfg. Co., 
87 S.E. 1018, 1020 (W. Va. 1916).  Continuing, the judgment 
creditor argues that if the garnishee already had obtained the 
arbitration award before service of the garnishment summons, then 
the rights assigned from the judgment debtor to the judgment 
creditor would have been previously liquidated by the binding 
arbitration.  According to the judgment creditor, because res 
judicata and collateral estoppel apply to the parties and their 
privies, the judgment creditor as assignee of a previously 
determined claim would, as a successor in interest, be subject to 
claim preclusion. 
 
But here, points out the judgment creditor, the garnishee 
did not commence the arbitration until after the garnishment 
summons had been served.  Thus, the argument continues, the 
judgment debtor's unliquidated claim for money became the 
property of the judgment creditor on July 19, 1993, the date the 
garnishee was served, and the garnishee "could not hope to bind" 
the judgment creditor to an arbitration award without serving it 
with the arbitration demand and allowing it the opportunity to 
 
 
 
 
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defend the garnishee's claims. 
 
Finally, the judgment creditor states it is not asking for a 
ruling that parties in the garnishee's position must always 
permit the garnishing creditor to participate in the arbitration. 
 Rather, the judgment creditor says, it "merely asks for a narrow 
holding that if the garnishee elects to proceed after service of 
a garnishment summons without the judgment creditor's 
participation, then the judgment creditor will not be bound to 
the arbitration result."  The judgment creditor contends that, as 
between the garnishee and the judgment debtor, the arbitration 
result is binding; as between the judgment creditor and the 
garnishee, it is not. 
 
The garnishee contends that if the garnishment summons acts 
as an involuntary assignment of the judgment debtor's rights to 
the judgment creditor, it should have sought the judgment 
debtor's consent to participate in the arbitration on the 
judgment debtor's behalf; if the judgment debtor refused, then 
the judgment creditor should have asked the trial court to order 
the judgment debtor to consent to the judgment creditor's 
participation.  The garnishee says the judgment creditor "did 
nothing and thus has waived its rights." 
 
Additionally, the garnishee contends that the time when it 
proceeded to determine what it owed the judgment debtor is not 
important because there was a lawful, binding contract requiring 
that any dispute be settled by arbitration.  Thus, the garnishee 
 
 
 
 
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argues, the trial court correctly dismissed the garnishment.  We 
do not agree. 
 
Under Virginia's statutes, Code §§ 8.01-511 through -525, 
garnishment is a "proceeding to enforce the lien of a writ of 
fieri facias on a liability of any person other than the judgment 
debtor"; the "action substantially is a proceeding by the 
judgment debtor in the name of the judgment creditor against the 
garnishee."  Virginia Nat'l Bank v. Blofeld, 234 Va. 395, 399, 
362 S.E.2d 692, 694 (1987).  Upon proof of any debt owed by the 
garnishee to the judgment debtor, the court may enter judgment in 
favor of the judgment creditor against the garnishee in the 
amount of such debt.  Lynch v. Johnson, 196 Va. 516, 520, 84 
S.E.2d 419, 422 (1954).  See Code § 8.01-519. 
 
In the present case, the garnishee contends the debt issue 
was finally decided in its favor in the arbitration proceeding, 
and says that issue may not be revisited in the garnishment 
proceeding.  But the judgment creditor was not a party to the 
contracts between the garnishee and the judgment debtor, and the 
record fails to show that the judgment creditor was a third party 
beneficiary of those contracts. 
 
When, as here, the garnishee commenced arbitration with the 
judgment debtor after being served with the garnishment summons, 
and excluded the judgment creditor from the arbitration, the 
judgment creditor may employ the garnishment court procedure to 
determine the extent of the debt owed by the garnishee to the 
 
 
 
 
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judgment debtor.  The fact that the debt was created by contracts 
containing an arbitration clause does not require a stranger to 
the contracts to follow the contracts' "procedural mechanisms for 
dispute resolution."  United States v. Harkins Builders, Inc., 45 
F.3d 830, 834 (4th Cir. 1995) (applying Virginia's garnishment 
law). 
 
And the garnishee will not be heard to argue that the 
judgment creditor has waived its rights by failing to intervene 
in the arbitration, when it was the garnishee who refused the 
judgment creditor's request to be allowed to participate.  Once 
the garnishee withheld consent, the judgment creditor was not 
obligated to seek intervention through the defaulting judgment 
debtor or to seek a court order allowing intervention.  Nothing 
in the garnishment statutes, or in Virginia's statutes dealing 
with arbitration, Code §§ 8.01-577 through -581.016, requires 
such action by a judgment creditor. 
 
Consequently, we hold that the trial court erred in 
dismissing the garnishment.  We will reverse the court's 
dismissal order and remand the case to the trial court for 
further proceedings. 
 
Reversed and remanded.