Green v. Goodman-Gable-Gould Co., Inc.

Present: All the Justices

JOYCE GREEN, ET AL.

v. Record No. 032106 OPINION BY JUSTICE CYNTHIA D. KINSER
June 10, 2004
GOODMAN-GABLE-GOULD COMPANY,
INC., ET AL.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Leslie M. Alden, Judge

In this appeal, we address the appropriate use of

declaratory judgments. Because we conclude that the

declaratory relief requested in this action was a

determination of a disputed issue rather than an

adjudication of the parties’ rights, we will reverse the

judgment of the circuit court granting declaratory relief.

MATERIAL FACTS AND PROCEEDINGS

A residence owned by Joyce E. Green and John W. Gural

(collectively, the “Homeowners”) was destroyed by fire. A

few days after the fire, the Homeowners decided to engage

the services of Goodman-Gable-Gould Company, Inc. (“GGG”),

a public insurance adjusting company, to assist them in

processing their fire loss claim with Allstate Insurance

Company (“Allstate”), the company that had issued the

policy insuring the Homeowners’ residence and personal

property. The Homeowners contacted James Goodman, a

representative of GGG who had approached them at the fire
about the services offered by GGG.1 Goodman met with the

Homeowners at the hotel where they were temporarily

staying. After Goodman explained a proposed contract to

the Homeowners, Gural executed the one-page contract.2

In pertinent part, the contract provided that the

Homeowners were employing “Goodman-Gable-Gould/Adjusters

International” to assist them in adjusting the fire loss

claim with Allstate. GGG was “authorized to prepare all

necessary inventories and other applicable and/or required

instruments to comply with the provisions” of the Allstate

policy. In return for GGG’s services, the Homeowners

agreed to pay GGG a fee of ten percent of “the gross amount

adjusted or otherwise recovered.” The Homeowners also

assigned to GGG “all moneys due or to become due from”

Allstate to the extent of GGG’s fee. Gural also executed

an addendum to the contract that required GGG to waive that

portion of its fee relating to rebuilding the Homeowners’

1
According to Goodman, GGG learns about fires, floods,
and tornadoes via several paging systems. Upon receiving a
page about a particular disaster, GGG decides whether it is
of sufficient magnitude to warrant further investigation.
2
The parties stipulated at trial that Green was a
party to the contract with GGG and had ratified that
contract even though she did not sign it.

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residence if they elected to retain Rolyn Construction for

that purpose.

The Homeowners eventually became dissatisfied with the

manner in which GGG was performing its contractual

obligations. Consequently, they authorized their attorney

to request that GGG withdraw from the adjustment of the

fire loss claim with Allstate. A letter to GGG for that

purpose stated:

On behalf of Joyce Green and John Gural, we
request that you and your firm withdraw from this
matter and allow us to deal directly with
Allstate. We appreciate your assistance, and
will call you if your assistance is needed again.
When our clients’ claim is paid, we will notify
you and discuss your fee.

Following receipt of the letter, GGG advised the

Homeowners’ counsel that GGG did not agree with the request

to “withdraw.” In a letter to Allstate, GGG demanded that

Allstate include GGG as an additional payee on any check

issued on the Homeowners’ claim. GGG also asserted that it

had a lien interest in the insurance proceeds and Allstate

had an obligation to honor the Homeowners’ assignment of

funds. This litigation then ensued.

In a motion for judgment naming the Homeowners and

Allstate as defendants, GGG sought a declaratory judgment

that, inter alia, GGG had an interest in the insurance

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proceeds and that it was owed a fee of ten percent of those

proceeds. GGG also sought monetary damages in claims for

breach of contract and quantum meruit against the

Homeowners, and in a conversion claim against Allstate.

Trial of the case was set to commence on Monday, April

28, 2003. On the Wednesday before the scheduled trial, GGG

served a motion to nonsuit all the claims except those

seeking declaratory relief and to waive a jury trial on the

remaining issues. GGG’s stated reason for filing this

motion was the fact that Allstate had not yet resolved the

Homeowners’ fire loss claim. In GGG’s view, the proper

course of action was to seek only declaratory relief.

The next day, the Homeowners filed a written objection

to GGG’s request to proceed only with the declaratory

judgment claim.3 The Homeowners stated that they did not

object to GGG’s nonsuit of the breach of contract and

quantum meruit claims but argued that, without those

claims, declaratory relief was not appropriate. On the day

of the scheduled trial, the Homeowners also filed a motion

for summary judgment on the declaratory judgment claim.

3
The Homeowners first raised the issue regarding the
appropriateness of declaratory relief in a demurrer to
GGG’s motion for judgment. They asserted that GGG was
seeking a judgment regarding a disputed issue of fact
rather than an interpretation of a defined right.
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They again asserted that the “declaratory judgment action

was appropriate only because it was pursued in conjunction

with the substantive counts against the [Homeowners].”

Since those claims had been nonsuited, the Homeowners

argued that declaratory relief did not lie because GGG was

using that procedure to avoid its burden of proof on the

nonsuited claims. Thus, the Homeowners asked the circuit

court to dismiss the declaratory judgment claim, or

alternatively, grant summary judgment in their favor.

After hearing argument on the Homeowners’ motion, the

circuit court took the matter under advisement and

proceeded with a jury trial on the declaratory judgment

claim. The court eventually denied the motion for summary

judgment during the trial.

At the close of the evidence, the circuit court

submitted one factual issue to the jury in an

interrogatory: “Do you find that Goodman, Gable, [&] Gould

Company rendered substantial performance to the Defendants

Joyce Green and John Gural under their November 5, 2001

contract with them prior to the March 22, 2002 letter

requesting Goodman, Gable[,] & Gould Company to withdraw

from the claim?” The jury answered “Yes” to this

interrogatory. The circuit court subsequently entered a

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final order granting declaratory relief to GGG and ruling

that GGG has an “irrevocable interest” in the insurance

proceeds attributable to the Homeowners’ claim for the fire

loss, that the amount of its interest is ten percent of

“the gross amount paid or to be paid by Allstate . . .

under the . . . policy of insurance,” that the assignment

in favor of GGG was valid and enforceable, and that

Allstate shall pay directly to GGG all sums that are due or

may become due to GGG from the Homeowners’ claim. We

awarded the Homeowners this appeal.

ISSUES AND ANALYSIS

The sole issue is whether the circuit court abused its

discretion in allowing this case to proceed as a

declaratory judgment action after GGG nonsuited its other

claims. Resolution of this issue requires an analysis of

the proper function of a declaratory judgment.

The purpose of declaratory judgments, which are

“creatures of statutes,” see Code §§ 8.01-184 through –191,

is to “supplement rather than to supersede ordinary causes

of action and to relieve litigants of the common law rule

that no declaration of rights may be judicially adjudged

until a right has been violated.” Williams v. Southern

Bank of Norfolk, 203 Va. 657, 661-62, 125 S.E.2d 803, 806-

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07 (1962). Declaratory judgments provide relief from the

uncertainties stemming from controversies over legal

rights, USAA Cas. Ins. Co. v. Randolph, 255 Va. 342, 346,

497 S.E.2d 744, 746 (1998), but they are not to be utilized

“as instruments of procedural fencing, either to secure

delay or to choose a forum.” Williams, 203 Va. at 662, 125

S.E.2d at 807. “ ‘Where a declaratory judgment as to a

disputed fact would be determinative of issues, rather than

a construction of definite stated rights, status, and other

relations, commonly expressed in written instruments, the

case is not one for declaratory judgment.’ ” Id. at 663,

125 S.E.2d at 807 (quoting 16 Am. Jur., Declaratory

Judgments, § 20 at 294-95); accord Hoffman Family, L.L.C.

v. Mill Two Associates P’ship, 259 Va. 685, 693, 529 S.E.2d

318, 323 (2000); Randolph, 255 Va. at 346, 497 S.E.2d at

746.

This Court addressed the propriety of using a

declaratory judgment action to decide disputed issues in

Randolph. There, an employee filed a declaratory judgment

proceeding to determine whether his injury arose out of and

in the course of his employment. 255 Va. at 344, 497

S.E.2d at 745. We held that declaratory judgment was

inappropriate “because the case [did] not involve a

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determination of rights, but only involve[d] a disputed

issue to be determined in future litigation between the

parties, namely, whether [the employee’s] injuries arose

out of and in the course of his employment.” Id. at 347,

497 S.E.2d at 747.

Similarly, in Williams, a bank filed a petition for

declaratory judgment seeking a determination whether it

could be held liable for damages in a civil action for

malicious prosecution. 203 Va. at 658-59, 125 S.E.2d at

804. A former customer of the bank had been the subject of

11 indictments for larceny in regard to the financing of

motor vehicles by the bank. Id. at 658, 125 S.E.2d at 804.

After the customer was acquitted of two of the charges, the

Commonwealth’s Attorney “nol pros[sed]” the remaining nine

indictments. Id. The customer then threatened 11

malicious prosecution actions against the bank. Id. The

sole issue presented in the declaratory judgment proceeding

was one of disputed fact, whether the bank had made a full

and honest disclosure of all material facts within its

knowledge to its attorney and the Commonwealth’s Attorney.

Id. at 663, 125 S.E.2d at 807. We concluded that

declaratory judgment was not appropriate because “[t]he

determination of that issue rather than an adjudication of

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the rights of the parties was the real object of the

proceeding.” Id. The bank’s use of a declaratory judgment

proceeding allowed it to pick the forum and its position at

the trial of the cause of action. Id., 125 S.E.2d at 808.

In the declaratory judgment proceeding here, GGG

sought to determine whether it had substantially performed

its obligations under the contract with the Homeowners, as

evidenced by the interrogatory submitted to the jury. Like

the employee in Randolph and the bank in Williams, GGG’s

actual objective in the declaratory judgment proceeding was

a determination of that disputed issue rather than an

adjudication of the parties’ rights. See Williams, 203 Va.

at 663, 125 S.E.2d at 807. However, that issue should have

been litigated in the context of a breach of contract

claim. By nonsuiting that claim and seeking only

declaratory relief, GGG did not have to prove, by the

greater weight of the evidence, a valid contract, a breach

of that contract by the Homeowners, and damages resulting

from the breach. See Shenandoah Milling Co. v. Phosphate

Products Corp., 161 Va. 642, 650, 171 S.E. 681, 684 (1933).

The jury instructions themselves illustrate this

point. The jury was not instructed with regard to the

elements that a plaintiff must prove to establish a breach

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of contract. Instead, the jury was instructed that the

issue in the case was whether GGG had substantially

performed its contract with the Homeowners prior to the

letter requesting GGG to withdraw from the claim and that

GGG had the burden of proof on that issue by the greater

weight of the evidence. Nevertheless, the jury was

instructed that “[a] party to a contract who prevents the

other party from performing his obligations under a

contract has breached the contract.” Similarly, the

circuit court instructed the jury with regard to what

constitutes a material breach of a contract and that “[a]

breach of a contract cannot be material if the breaching

party has rendered substantial performance.” In other

words, the jury was instructed about various aspects of a

breach of contract claim but were never told that GGG had

to prove, by the greater weight of the evidence, that the

Homeowners breached the contract.

GGG and Allstate, however, assert that declaratory

relief was appropriate because it provided all the parties

with a determination as to whom the insurance proceeds

should be paid once that amount was ascertained.4 Relying

4
We note that Allstate, in a demurrer to the motion
for judgment, took the position that declaratory relief was
not appropriate in this case.
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on our decision in Reisen v. Aetna Life & Cas. Co., 225 Va.

327, 302 S.E.2d 529 (1983), GGG and Allstate contend that,

without declaratory relief, neither of them could protect

their rights in the face of the competing claims to the

Homeowners’ unliquidated insurance claim. We do not agree.

In Reisen, the appellant, Philip O. Reisen, filed a

tort action against Jack W. Goins, who had driven his truck

into Reisen while he was on a sidewalk. 225 Va. at 329,

302 S.E.2d at 530. The insurance company providing

coverage on Goin’s truck advised Reisen and Goins that the

loss was not covered under the policy because Goins’ act

was intentional. Id. at 330, 302 S.E.2d at 530. The

insurance company then filed a declaratory judgment

proceeding seeking a determination that it was not

obligated to pay any judgment that might be rendered

against Goins. Id. The issue on appeal was “whether

declaratory judgment [lay] to decide a coverage question

when the ultimate issue of fact determining coverage[,

whether Goins’ act was intentional, was] set for

adjudication in a related, pending tort action.” Id. at

329, 302 S.E.2d at 530.

Because of a firm offer from Reisen to settle his

claim within the policy limits, the insurance company had a

11
duty to exercise good faith in dealing with that offer.

Id. at 335, 302 S.E.2d at 533. That duty was independent

of the insurance company’s duty to defend Goins. Id.

Thus, we concluded that declaratory relief was appropriate

because the parties needed guidance in their future conduct

in relation to each other so as to avoid the risk of action

that would jeopardize their respective interests. Id.; see

also Liberty Mut. Ins. Co. v. Bishop, 211 Va. 414, 421, 177

S.E.2d 519, 524 (1970). Unlike the situation in Williams,

declaratory relief regarding the disputed fact in issue in

Reisen “resulted . . . in delineation and interpretation of

definite rights expressed in the insurance contract.”

Reisen, 225 Va. at 337, 302 S.E.2d at 534; see also

Randolph, 255 Va. at 348, 497 S.E.2d at 747 (unlike Reisen,

employee did not seek adjudication of rights).

The same distinction exists between Reisen and the

present case. Although GGG asserts that it was seeking a

determination of its rights vis-à-vis the Homeowners with

regard to the insurance proceeds, GGG was actually asking

the circuit court to decide whether the Homeowners had

breached the contract between them and GGG. That was an

inappropriate use of declaratory judgment.

CONCLUSION

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 A trial court’s authority to enter declaratory relief

is discretionary. Randolph, 255 Va. at 346, 497 S.E.2d at

746 (citing Bishop, 211 Va. at 421, 177 S.E.2d at 524).

That discretion must, however, be exercised ”with great

care and caution.” Id. For the reasons stated, we

conclude that the circuit court abused its discretion by

allowing GGG to seek declaratory relief after it nonsuited

the other claims. GGG was using declaratory judgment as an

instrument of “procedural fencing.” Williams, 203 Va. at

662, 125 S.E.2d at 807; accord Hoffman, 259 Va. at 692, 529

S.E.2d at 323. Thus, we will reverse the judgment of the

circuit court and dismiss the declaratory judgment action.5

Reversed and dismissed.

5
We also find no merit in GGG’s motion to dismiss this
appeal and will deny that motion.
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