Present: All the Justices
ELIZABETH ANN LONG RYLAND,
EXECUTRIX OF THE ESTATE
OF POLLY E. LONG
v. Record No. 020306 OPINION BY JUSTICE CYNTHIA D. KINSER
October 31, 2003
MANOR CARE, INC., ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Jonathan C. Thacher, Judge
This appeal involves a chancery suit brought under the
provisions of Code § 8.01-248(D) and challenges the circuit
court’s judgment setting aside a default judgment. Because
we cannot say that the court’s judgment was plainly wrong
or without evidence to support it, we will affirm that
judgment.
MATERIAL FACTS AND PROCEEDINGS
Manor Care, Inc. and Manor Care of America, Inc.
(collectively “Manor Care”), filed a bill of complaint,
seeking to set aside a default judgment that previously had
been entered against it in favor of Elizabeth Ann Long
Ryland, executrix for the estate of Polly E. Long
(“Ryland”). The Circuit Court of Fairfax County had
entered that default judgment in a medical malpractice
action styled Ryland v. Tyroler, et al, No. 196801 (Va.
Cir. Ct. Aug. 31, 2001) (order granting default judgment). 1
Manor Care unsuccessfully moved to have the default
judgment in the medical malpractice action reconsidered or
set aside. While that motion was pending, Manor Care filed
this separate chancery suit under the provisions of Code
§ 8.01-428(D). The circuit court heard the following
evidence ore tenus.
On July 18, 2001, Manor Care received from its
registered agent the notice of motion for judgment and
other papers concerning the medical malpractice action that
Ryland had re-filed against it. Manor Care faxed those
documents to its insurance company, PHICO Insurance Company
(“PHICO”), on July 19, 2001, and requested PHICO to assign
defense counsel to represent Manor Care as soon as
possible. That same day, Manor Care sent the documents
concerning the re-filed medical malpractice action to PHICO
via a commercial overnight delivery service. The
litigation coordinator for Manor Care acknowledged that
Manor Care relied on PHICO to retain defense counsel and to
assure that responsive pleadings were timely filed.
On July 25, 2001, after receiving the documents from
Manor Care, PHICO assigned Vicki L. Layman (“Layman”) to
1
Ryland had re-filed the medical malpractice action
after taking a nonsuit in a prior action.
2
defend the action. 2 The written assignment, which PHICO
faxed to Layman on that date, requested Layman to enter an
appearance and answer the action on behalf of its insured,
Manor Care. PHICO advised Layman that an action had been
filed in 1998 involving the same plaintiff and defendant,
and that it was reopening its file. PHICO sent a copy of
the assignment to Manor Care.
After receiving the assignment from PHICO, Layman
contacted the attorney representing Ryland and obtained an
extension of time to August 24, 2001, for Manor Care to
file responsive pleadings. 3 Then, in a letter dated August
1, 2001, Layman advised PHICO that she was requesting an
increase in her hourly compensation for representing
PHICO’s insureds. Layman asked PHICO to advise her by
August 6, 2001, as to whether it agreed not only to her
increased fee but also to monthly billing. If PHICO
approved the rate increase, Layman asked PHICO to forward
the necessary documents to confirm their agreement.
Finally, Layman advised PHICO that, in the event it did not
approve her fee increase, PHICO should immediately reassign
2
Layman had represented Manor Care in the non-suited
medical malpractice action filed by Ryland.
3
According to Layman, responsive pleadings were
originally due on August 7, 2001.
3
the defense of Ryland’s medical malpractice case against
Manor Care to another attorney since responsive pleadings
were due on August 7, 2001. 4
PHICO received Layman’s August 1 letter on August 6,
2001. PHICO’s senior claims representative telephoned
Layman that same day and left a detailed voice message
authorizing the requested rate increase for Layman’s
defending Manor Care in the Ryland medical malpractice
action. However, PHICO never sent Layman a written
agreement reflecting the rate increase.
On August 16, 2001, a Pennsylvania court, acting on a
petition by the Insurance Commissioner of the Commonwealth
of Pennsylvania, placed PHICO into “Rehabilitation.”
According to PHICO’s senior claims representative, that
action caused many defense attorneys to become reluctant
about working for PHICO because all bills not paid as of
that date were placed in the Rehabilitation estate. Due to
PHICO’s financial circumstances, Layman notified PHICO, in
a letter faxed to PHICO on August 21, 2001, that she was
unable to represent Manor Care in the Ryland medical
malpractice action and that PHICO, therefore, should
immediately reassign the matter to another attorney.
4
Apparently, Layman did not advise PHICO at that time
about the extended deadline for filing responsive
4
Layman also informed PHICO that Ryland’s attorney had
agreed to extend the deadline for filing responsive
pleadings to August 24, 2001.
That same day, PHICO contacted another attorney, Gary
Godard, about representing Manor Care and faxed “the new
assignment” to him. Godard agreed to represent Manor Care,
and in a letter received by PHICO on August 22, 2001,
Godard’s office confirmed that Godard would file
appropriate responsive pleadings on behalf of Manor Care.
On August 21, PHICO also advised Manor Care that a new
attorney had been assigned to the case and that the
attorney would file responsive pleadings. Manor Care’s
litigation coordinator did not contact PHICO again until
August 30, 2001.
Layman received a voice message from Godard on August
23, 2001, and she then called Ryland’s attorney to advise
that Godard had been assigned to the case. In a prior
telephone conversation with Ryland’s attorney, Layman had
requested a 30-day extension for filing responsive
pleadings, but the attorney did not agree to her request.
However, at trial, Manor Care attempted to show that Layman
had “asked the judge” for and had received a verbal
agreement that a 30-day extension would be granted to the
pleadings.
5
new defense counsel. The circuit court made a factual
finding that there was no evidence to support any claim
that such an extension had been agreed to or granted by the
court. Nevertheless, the circuit court accepted that Manor
Care had that understanding, whether it was right or wrong.
On August 27, 2001, PHICO learned that Godard had a
conflict of interest and could not represent Manor Care.
Consequently, PHICO contacted yet another attorney about
representing Manor Care, but that attorney declined to do
so on August 28, 2001. Two days later, PHICO obtained
counsel to represent Manor Care and advised Manor Care of
that fact. However, unbeknownst to PHICO or Manor Care,
Ryland had moved for default judgment against Manor Care on
August 24, 2001. The court entered the judgment of default
on August 31, 2001.
After hearing this evidence, the circuit court
observed that Ryland’s attorney knew on August 23 that
Godard “allegedly, had been brought into this case, and it
was very shortly after that that this default judgment was
obtained.” The court queried whether it was “equitable
that this case [did not] get tried on its merits because
Mr. Godard had a conflict, and the law precludes him from
doing what he said he would do, and he [had] to get out of
the case[.]” In conclusion, the circuit court stated, “I
6
hang my hat on number one . . . in that the default
judgment should not, in equity, in good conscience, be
enforced. I’m not sure it rises to the level of
negligence.” For the reasons stated from the bench, the
court subsequently entered an order granting the relief
sought in the bill of complaint and vacating the default
judgment entered against Manor Care. Ryland appeals from
that judgment.
ANALYSIS
In Charles v. Precision Tune, Inc., 243 Va. 313, 317,
414 S.E.2d 831, 833 (1992), we stated that the provision
now numbered subsection (D) of Code § 8.01-428 “does not
create any new rights or remedies, but merely preserves a
court’s inherent equity power to entertain an independent
action” by a party seeking relief from any judgment. We
then enumerated the elements of this independent action in
equity:
(1) a judgment which ought not, in equity and good
conscience, to be enforced; (2) a good defense to the
alleged cause of action on which the judgment is
founded; (3) fraud, accident, or mistake which
prevented the defendant in the judgment from obtaining
the benefit of his defense; (4) the absence of fault
or negligence on the part of the defendant; and (5)
the absence of any adequate remedy at law.
Id. at 317-18, 414 S.E.2d at 833 (citing National Surety
Co. of New York v. State Bank of Humboldt, 120 F. 593, 599
7
(8th Cir. 1903)); accord Media General, Inc. v. Smith, 260
Va. 287, 290, 534 S.E.2d 733, 735 (2000). The party
seeking relief under Code § 8.01-428(D) has the burden to
prove each of these elements. Media General, id.
On appeal, Ryland acknowledges that only three of
these elements are in dispute: whether in equity and good
conscience the default judgment should be enforced; whether
an accident or mistake prevented Manor Care from having the
benefit of its defense; and whether there was an absence of
fault or negligence on the part of Manor Care. However,
Ryland asserts that the circuit court erred in setting
aside the default judgment because Manor Care failed to
prove these elements. Manor Care disagrees and argues that
the court’s judgment is supported by sufficient evidence.
The parties do not dispute our standard of review in
this appeal. Since the circuit court heard evidence ore
tenus, its judgment cannot be disturbed on appeal unless
the court’s findings are plainly wrong or without evidence
to support them. Code § 8.01-680; Pizzarelle v. Dempsey,
259 Va. 521, 527, 526 S.E.2d 260, 263 (2000); Blue Cross &
Blue Shield of Virginia v. St. Mary’s Hosp. of Richmond,
Inc., 245 Va. 24, 34, 426 S.E.2d 117, 123 (1993). We
review the evidence and all reasonable inferences in the
light most favorable to the prevailing party at trial.
8
Ravenwood Towers, Inc. v. Woodyard, 244 Va. 51, 57, 419
S.E.2d 627, 630 (1992).
Before addressing the merits of Ryland’s challenge to
the circuit court’s judgment, we point out that the court
did not articulate specific findings with regard to the
five elements that must be proven in order to obtain relief
under Code § 8.01-428(D). 5 Instead, the court stated only
that the default judgment should not, in equity and good
conscience, be enforced and that it was not sure whether
Manor Care’s conduct rose “to the level of negligence.” 6 We
presume that the court nonetheless made the necessary
findings since it set aside the default judgment.
Even so, we take this opportunity to stress that a
trial court must articulate its findings with particularity
regarding each of the five elements set forth in Precision
Tune. Because of the need to have finality and certainty
with regard to judgments, see Byrum v. Lowe & Gordon, Ltd.,
225 Va. 362, 365, 302 S.E.2d 46, 48 (1983), a trial court’s
decision to set aside a default judgment is a significant
action and must, therefore, include its consideration of
5
The parties stipulated that Manor Care had a good
defense to the cause of action upon which the default
judgment was granted.
9
and findings with regard to all the necessary elements. In
a somewhat analogous situation, i.e., setting aside a jury
verdict and ordering remittitur, we require that the record
include “both the trial court’s conclusion that the verdict
was excessive and a demonstration that, in reaching that
conclusion, the trial court considered ‘factors in evidence
relevant to a reasoned evaluation of the damages.’ ”
Poulston v. Rock, 251 Va. 254, 259, 467 S.E.2d 479, 482
(1996) (quoting Bassett Furniture Indus. v. McReynolds, 216
Va. 897, 911-12, 224 S.E.2d 323, 332 (1976)); accord
Shepard v. Capitol Foundry of Virginia, Inc., 262 Va. 715,
721, 554 S.E.2d 72, 75 (2001). No less detailed analysis
is permissible when setting aside a default judgment.
Turning now to the merits of the issue on appeal, we
conclude that, despite the sequence of events starting with
PHICO’s requesting Layman to file an answer to the re-filed
medical malpractice action on behalf of Manor Care and
ending with her ultimate decision not to represent Manor
Care, the critical events that led to the entry of default
judgment commenced when PHICO assigned the case to Godard.
At that point, sufficient time remained before the August
24 deadline expired during which responsive pleadings could
6
Ryland’s assignments of error address only the
sufficiency of evidence and do not challenge the court’s
10
have been filed. Godard’s office confirmed in writing on
August 21 that he would file appropriate responsive
pleadings on behalf of Manor Care. But, Godard later
learned, at a time not shown in the record, that he had a
conflict of interest and could not represent Manor Care.
Unfortunately, he did not advise PHICO or Manor Care of
that fact until August 27, three days after responsive
pleadings were due.
We hold that the record is sufficient to support a
finding that Godard’s actions constituted a mistake that
prevented Manor Care from having the benefit of its
defense. See Director, State Employees Workers’ Comp. Div.
v. Evans, 889 S.W.2d 266, 269 (Tex. 1994) (attorney’s
failure to appear was due to accident or mistake when
predecessor attorney misdated the trial date on a calendar
and conveyed the wrong information to the new attorney).
Because this mistake impacted Godard’s ethical
responsibilities, it is not akin to an attorney’s error
about a filing deadline or the negligent failure to file a
pleading by a certain date. Godard had no choice but to
decline the representation of Manor Care. As the circuit
court correctly commented during closing arguments, the law
precluded Godard from doing what he indicated to PHICO in
failure to enunciate these findings.
11
good faith that he would do. His conflict of interest and
failure to inform either PHICO or Manor Care about that
conflict until after the deadline for filing responsive
pleadings had passed caused Manor Care to lose the benefit
of its defense.
Next, we also hold that the record is sufficient to
support the circuit court’s implied finding that both PHICO
and Manor Care were free from fault or negligence during
this critical period. 7 However, Ryland argues that PHICO
and Manor Care were, in fact, negligent because neither of
them contacted Godard before August 24 to confirm that he
had filed an answer on behalf of Manor Care, or called the
circuit court clerk’s office either to verify that Godard
had filed responsive pleadings or to determine whether
information Manor Care allegedly received concerning a 30-
day extension of time was accurate. We are not persuaded
7
Citing Ayres v. Morehead’s Adm’r, 77 Va. 586 (1883),
Ryland argues that the actions of PHICO must be attributed
to Manor Care. In that case, this Court stated that “[t]he
rule that a party who has, through the negligence of
himself or his agents or attorneys, failed to avail himself
of a defence which he might have made at law, will not be
relieved in equity is too well settled to require any
extended reference to the adjudged cases.” Id. at 588. It
is not necessary to decide that issue in the present case
because we conclude that neither PHICO nor Manor Care were
negligent during the period of time immediately preceding
the default. We note, however, that Ryland has not argued
that Godard’s actions should be attributed to Manor Care.
12
by this argument. Given the written communication from
Godard’s office advising that he would file responsive
pleadings, we cannot say that either PHICO or Manor Care
was negligent by failing to make further inquiries at that
time.
The present situation is distinguishable from the
circumstances in Media General that led us to hold that the
defendant there was not free of fault or negligence. In
that case, the evidence showed only that a system put in
place by the defendant to receive and respond to service of
process had failed, but there was no evidence explaining
how or why the system had failed. 260 Va. at 291, 534
S.E.2d at 735. Thus, there was no evidence that the
defendant was free of fault or negligence when it did not
respond to the motion for judgment. Id. In contrast, we
have evidence in the present case explaining why responsive
pleadings were not timely filed after Godard agreed to
represent Manor Care, and that evidence does not impute any
fault or negligence to PHICO or Manor Care.
Finally, we hold that the record is sufficient to
support the circuit court’s finding that, in equity and
good conscience, the default judgment should not be
enforced. As Ryland argued, this element does not carry
more weight than the other four elements, all of which must
13
be proven in order to obtain relief under Code § 8.01-
428(D). The five elements set forth in Precision Tune,
taken together, reflect the balance that must be struck
between the need to uphold the rules of court by
sanctioning the late appearance of a party and the
injustice that results from denying that party the
opportunity to litigate a claim on its merits. See
Restatement (Second) of Judgments § 67 cmt. a (1982).
CONCLUSION
In summary, we cannot say that the circuit court’s
judgment was plainly wrong or without evidence to support
it. See Code § 8.01-680. The question here is not whether
the evidence would have supported a judgment in favor of
Ryland. Instead, the relevant inquiry is whether, upon
applying correct principles of law, the record contained
sufficient evidence to support the judgment of the circuit
court in favor of Manor Care. Barnes v. Craig, 202 Va.
229, 235, 117 S.E.2d 63, 67 (1960) (citing Barnes v. Moore,
199 Va. 227, 228, 98 S.E.2d 683, 684 (1957)). And, we
conclude that it did. As with a jury verdict, if there is
evidence to support a trial court’s judgment rendered after
receiving evidence ore tenus, this Court cannot simply
overturn that judgment and substitute its own judgment,
even if its opinion might differ from that of the trial
14
court. See Cable v. Commonwealth, 243 Va. 236, 239, 415
S.E.2d 218, 220 (1992).
For these reasons, we will affirm the judgment of the
circuit court. 8
Affirmed.
8
In light of our decision, it is not necessary to
address Ryland’s remaining assignment of error.
15