Polytechnic Inst. v. Interactive Return Service, Inc.

Present: Lacy, Keenan, Koontz, Kinser, Lemons, Agee, JJ., and
Compton, S.J.

VIRGINIA POLYTECHNIC INSTITUTE AND
  STATE UNIVERSITY, ET AL.
                                         OPINION BY
v.   Record No. 050710        JUSTICE LAWRENCE L. KOONTZ, JR.
                                       March 3, 2006
INTERACTIVE RETURN SERVICE, INC.

          FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
                     Theodore J. Markow, Judge


      The sole issue in this appeal is whether the Setoff Debt

Collection Act, Code §§ 58.1-520 through -535, (the “Act”)

permits an agency of the Commonwealth to offset the amount of a

monetary judgment in favor of a judgment creditor against a

larger debt owed by that judgment creditor to the agency.

                            BACKGROUND

      The events ultimately leading to this appeal began in the

mid-1990s when Interactive Return Service, Inc. (“Interactive

Service”) entered into certain research contracts with Virginia

Polytechnic Institute and State University (“Virginia Tech”) and

Virginia Tech Intellectual Properties, Inc. (“VTIP”).1     We have

previously related in some detail the subject matter of those

contracts and the specific obligations and performances of the

parties under those contracts in Virginia Polytechnic Inst. &



      1
       David A. Von Moll is an appellant to this appeal in his
official capacity as Comptroller for the Commonwealth of
Virginia pursuant to Code § 8.01-193.
State University v. Interactive Return Serv., Inc., 267 Va. 642,

595 S.E.2d 1 (2004).    The significance of that case to the

present appeal is that a jury returned a verdict on a breach of

contract claim against Virginia Tech and VTIP, jointly and

severally, in the amount of $110,000.    Id. at 646, 595 S.E.2d at

2.   The Circuit Court of the City of Richmond entered judgment

in that amount in favor of Interactive Service, and we affirmed

that judgment.    Id. at 656, 595 S.E.2d at 9.   Additionally, we

noted that Interactive Service “admitted at trial that it owed

Virginia Tech approximately $750,000.”    Id. at 647, 595 S.E.2d

at 3.

        Thereafter, on June 21, 2004, Virginia Tech notified

Interactive Service, pursuant to a provision of the Act, that it

would satisfy the above referenced monetary judgment by applying

that amount against $749,611.06 Interactive Service owed to

Virginia Tech.    Interactive Service contested the setoff on

several grounds and demanded a hearing before a debt setoff

panel established by Virginia Tech under its operating statutes

to “determine whether the claim is valid” and whether the

“claimed sum asserted as due and owing is correct.”    Code

§ 58.1-526.

        The panel held a hearing on September 1, 2004 in which it

received and considered the testimony of the parties’ witnesses

                                   2
and the argument of the parties’ counsel.      On September 28,

2004, the panel issued a written opinion listing its findings of

fact and rendering its decision.       The panel found that, in

pertinent part, under a valid contract Virginia Tech had

performed research services for Interactive Service with a value

in excess of $122,833.56 (the amount of the prior judgment in

favor of Interactive Service and post-judgment interest at the

time of the hearing).    The panel concluded that the “sum of

$122,883.56 is a valid claim subject to the provisions of the

. . . Act . . . and that the sum of $122,883.56 shall be

released to” Virginia Tech.   Interactive Service did not appeal

the panel’s decision.

     Pursuant to Code §    8.01-455, Virginia Tech and VTIP

subsequently filed a motion in the circuit court applying to

have Interactive Service’s breach of contract judgment against

them marked satisfied.    Following a hearing on the motion, the

circuit court issued a final order dated December 27, 2004.

     Initially, the circuit court ruled that Interactive Service

was barred from challenging the amounts owed because it failed

to appeal the panel’s findings regarding those amounts within

the 30 days allowed by Code §   58.1-527.     Next, addressing

Interactive Service’s assertion that the Act applies only to tax

refunds, the circuit court concluded that “the Act is intended

                                   3
to allow agencies of the Commonwealth such as [Virginia Tech] to

set off debts owed such agencies against tax refunds owed by the

Commonwealth to the debtor.”   Since funds due to Interactive

Service on a breach of contract judgment, not a tax refund, were

implicated in the case, the circuit court denied Virginia Tech

and VTIP’s motion to have the breach of contract judgment marked

satisfied.   We awarded Virginia Tech this appeal.2

                             DISCUSSION

     Our resolution of the question whether the circuit court

erred in denying the motion to have the monetary judgment in

favor of Interactive Service marked satisfied requires our

interpretation of the Act.   In doing so, we are guided by well-

established principles.   Interpretation of a statute is a pure

question of law subject to de novo review by this Court.

Ainslie v. Inman, 265 Va. 347, 352, 577 S.E.2d 246, 248 (2003).

In interpreting a statute, we are required to “ascertain and

give effect to the intention of the legislature,” which is

usually self-evident from the statutory language.     Chase v.

DaimlerChrysler Corp., 266 Va. 544, 547, 587 S.E.2d 521, 522

(2003).   When the language in a statute is clear and

unambiguous, we apply the statute according to its plain



     2
       We also awarded VTIP a separate appeal. Because of the
view we take in the present appeal, by separate order entered
                                4
language.   HCA Health Servs. v. Levin, 260 Va. 215, 220, 530

S.E.2d 417, 419-20 (2000).

     We begin our analysis by emphasizing that the issue in this

case is not whether the Act applies to tax refunds but, rather,

whether the Act applies only to such refunds.    Beyond question,

the statutory scheme of the Act applies to Virginia state and

local income tax refunds due any individual having a delinquent

debt or account with a state agency or institution which

obligation has not been satisfied or set aside by court order,

or discharged in bankruptcy.   See Code § 58.1-520 (defining

claimant agency, debtor, delinquent debt, and refund).    In

general, this statutory scheme provides the procedures to be

followed by the claimant agency to establish the validity of its

claim, to establish the correctness of the amount of that claim

against the debtor, and to secure the assistance of the

Department of Taxation to accomplish a setoff of the debtor’s

tax refund against the debt.   See Code § 58.1-526 (hearing by

agency established by its operating statutes); Code § 58.1-527

(appeal to a designated circuit court); Code § 58.1-523

(Department of Taxation shall render assistance in collection of

delinquent account or debt owing to claimant agency by debtor);




today we have dismissed VTIP’s appeal as moot.
                                5
and Code § 58.1-529 (Department of Taxation to setoff refund

against debt).

     To resolve the question whether this statutory scheme is

limited in its application to tax refunds, our focus turns to

Code §   58.1-535.   In doing so, we note that there is no

ambiguity in the language of that statute.

     Code § 58.1-535(A) states that:

          In addition to the collection remedy provided in
     this article, if a claimant agency has on deposit any
     funds which are due to the debtor, the claimant agency
     may apply such funds to the payment of any delinquent
     debt which the debtor owes to the claimant agency,
     provided that the claimant agency first provides
     written notification to the debtor of its intent to
     apply the funds against the debt.

     Code §   58.1-535(D) defines “funds on deposit” as “any

funds of a debtor that a claimant agency may have in its

possession including . . . any funds due to a debtor arising

from a contractual agreement with a claimant agency.”    In

contrast to Code § 58.1-520, this subsection defines “debtor” as

“any individual, business or group having a delinquent debt or

account with any claimant agency which obligation has not been

satisfied by court order, set aside by court order, or

discharged in bankruptcy.”

     The plain language of Code § 58.1-535 evinces a clear

legislative intent to extend the scope of the collection remedy

provided a claimant agency by the other provisions of the Act
                                6
beyond instances in which the debtor is due a tax refund.

Initially, that intent is signaled by the language “[i]n

addition to the collection remedy provided in this article” in

the introductory language of subsection (A).   The language in

subsection (D) defining “funds on deposit” to include “any funds

due a debtor arising from a contractual agreement with a

claimant agency” clearly broadens the scope of the remedy

provided by the statute beyond instances involving a tax refund

due the debtor.   Additionally, the definition of “debtor” in

subsection (D) is broadened to include not merely an individual

as defined in Code § 58.1-520, but also “any business or group

having a delinquent debt or account with any claimant agency.”

     The General Assembly’s use of the words “refund” and

“refunds” in several other subsections in the Act, and the

absence of the term in Code § 58.1-535, provide additional

support for the conclusion that the General Assembly did not

intend to limit the applicability of Code § 58.1-535 to tax

refunds.   See Code §§ 58.1-523, -524, -525(A) & (B), -528(A), -

530, and -531.1 (all using the terms “refund” or “refunds”); see

also Industrial Dev. Auth. v. Board of Supervisors, 263 Va. 349,

353, 559 S.E.2d 621, 623 (2002)(stating that “when the General

Assembly includes specific language in one section of an act,

but omits that language from another section,” an appellate

                                 7
court “presume[s] that the exclusion of the language was

intentional”).

     There is no merit to Interactive Service’s contention that

the placement of the Act in the taxation title of the Code

supports the circuit court’s finding that it only applies to tax

refunds.   Certainly, appellate courts read related statutes in

pari materia in order to give, when possible, consistent meaning

to the language used by the General Assembly.    LZM, Inc. v.

Virginia Dept. of Taxation, 269 Va. 105, 111, 606 S.E.2d 797,

800 (2005).   However, where a plain reading of a statute yields

a result that is not inconsistent with related provisions, the

statute’s mere placement in a certain section of the Code will

not negate or alter its clear and plain meaning.    See HCA Health

Servs., 260 Va. at 220-21, 597 S.E.2d at 420.

     We turn now to consider the application of Code § 58.1-535

to the undisputed facts in this case.   At the time the panel

convened, Virginia Tech, the claimant agency, held $122,883.56

in funds that were due to Interactive Service under the breach

of contract judgment.   Those funds clearly qualify as “funds on

deposit” under the broad definition of “any funds of a debtor

that a claimant agency may have in its possession, including

. . . funds due to a debtor arising from a contractual agreement

with a claimant agency.”   (Emphasis added.)    The panel found

                                 8
that Interactive Service owed a delinquent debt to Virginia Tech

in an amount greater than the monetary judgment.   Interactive

Service did not appeal that determination.   Furthermore, we have

previously noted that Interactive Service admitted in the prior

breach of contract trial that it owed Virginia Tech

approximately $750,000.   The precise amount of that indebtedness

is not at issue; it is sufficient for purposes of this appeal

that the amount of the indebtedness exceeds the amount of the

monetary judgment and that this indebtedness is delinquent.

Accordingly, it is clear that Interactive Service owes Virginia

Tech a “delinquent debt,” and that debt is eligible for setoff

against Interactive Service’s “funds on deposit” with Virginia

Tech as permitted by Code §   58.1-535.   Thus, it necessarily

follows that the circuit court erred in denying Virginia Tech’s

motion to have the monetary judgment marked satisfied.3




     3
       Interactive Service contends that the issue of setoff is
barred by res judicata principles in this case. There is no
merit to this contention because a determination of the amount
of Interactive Service’s indebtedness to Virginia Tech was not
at issue in the breach of contract action in the circuit court.
Moreover, in the present case, the circuit court did not rule on
the res judicata issue and Interactive Service has not assigned
cross-error to the circuit court’s failure to do so. That issue
is not before us. Baumann v. Capozio, 269 Va. 356, 361, 611
S.E.2d 597, 600 (2005). We emphasize, however, that we do not
decide here the amount of the indebtedness which Interactive

                                 9
                           CONCLUSION

     For these reasons, we hold that the Setoff Debt Collection

Act is not limited in application to tax refunds, and that Code

§ 58.1-535 permits a claimant agency when in compliance with the

provisions of that statute to set off a monetary judgment debt.

Accordingly, the circuit court’s order denying the motion to

have the judgment against Virginia Tech marked satisfied will be

reversed, and the case remanded to the circuit court for the

sole purpose of entering an order marking the judgment

satisfied.

                                           Reversed and remanded.




Service may owe to Virginia Tech after giving effect to the
setoff.
                                10