COURT OF APPEALS OF VIRGINIA
Present: Judges Willis, Bray and Annunziata
Argued at Alexandria, Virginia
MOTOR VEHICLE DEALER BOARD
v. Record No. 3220-01-4
JOEY L. MORGAN OPINION BY
JUDGE JERE M. H. WILLIS, JR.
JOEY L. MORGAN AUGUST 20, 2002
v. Record No. 3245-01-4
MOTOR VEHICLE DEALER BOARD
FROM THE CIRCUIT COURT OF THE CITY OF ALEXANDRIA
Alfred D. Swersky, Judge
Eric K. G. Fiske, Assistant Attorney General
(Jerry W. Kilgore, Attorney General, on
briefs), for Motor Vehicle Dealer Board.
Stephen L. Swann for Joey L. Morgan.
The Motor Vehicle Dealer Board ("Board") contends that the
trial court erred: (1) in ruling that the Board improperly
excluded from recovery under the Motor Vehicle Transaction
Recovery Fund ("Fund") payment of attorney's fees and court costs
that were awarded in an underlying judgment, and (2) in ruling
that the Board improperly reduced the actual damages portion of
the underlying judgment.
Joey Morgan contends on cross-appeal that the trial court
erred in denying him attorney's fees pursuant to Code
§ 9-6.14:21. 1 For the following reasons, we affirm the judgment
of the trial court.
I. BACKGROUND
In September 1998, Joey Morgan purchased a car from Aquia
Motors, Inc. ("Aquia"). The purchase price was $5,120. Aquia
represented that the car was in good condition and had been
inspected for safety and emissions. Aquia further represented
that it had available and could transfer to Morgan clear title
to the car.
Shortly after the purchase, Morgan began experiencing
mechanical problems involving the engine, brakes, cooling
system, and suspension. He also discovered that the frame was
bent and needed repair. Aquia failed to provide registration.
Morgan attempted to return the vehicle, but Aquia refused to
take it back and assigned the financing documents to Mercury
Finance, which subsequently repossessed the car.
In August 1999, Morgan initiated a lawsuit against Aquia on
four grounds: (1) fraud; (2) violation of the Consumer
Protection Act, Code § 59.l-196, et seq.; (3) breach of express
and implied warranties; and (4) statutory recission of the
thirty-day temporary certificate of ownership pursuant to Code
§ 46.2-1542. On April 12, 2000, he was awarded a default
judgment against Aquia for actual damages of $9,668.48,
1
Effective October 1, 2001, Code § 9-6.14:21 was recodified
as Code § 2.2-4030.
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exemplary damages of $20,000, expert witness fees of $350,
attorney's fees of $7,285, and court costs of $156. The court
awarding the judgment recited evidence that Aquia had caused
Morgan loss or damage "by practicing fraud on [Morgan], or by
making fraudulent representations to him; or caused loss or
damage to [Morgan] by reason of one or more violations of the
Motor Vehicle Act, Virginia Code, § 46.2-1575 . . . ."
Morgan filed with the Board a claim under the Motor Vehicle
Transaction Recovery Fund, Code §§ 46.2-1527.1, et seq. 2 He
sought satisfaction of the judgment for the following elements:
Actual damages: $9,668.48
Expert witness fees: $ 350.00
Attorney's fees: $7,285.00
Court costs: $ 156.00
Recognizing that the maximum recoverable amount allowed by
statute was $15,000, he reduced the net amount of his claim to
$15,000. 3
On June 7, 2000, the Board notified Morgan that his claim
provided insufficient information as to how the court had
2
The Virginia General Assembly created the Motor Vehicle
Transaction Recovery Fund in 1988. Its purpose is to satisfy
unpaid judgments that have been obtained against a licensed
motor vehicle dealer or salesperson for fraud, fraudulent
practices, or any loss or damage resulting from the violation of
any of the provisions of this chapter.
3
Effective July 1, 2001, the statutory recovery limit was
increased to $20,000.
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determined "actual damages" and requested additional
information. Morgan provided the following breakdown:
Purchase price of warranty: $5,286.10
Finance charges: $ 547.37
Repair costs: $2,500.00
Loss of use/rental costs: $1,020.00
Loss of wages: $ 315.00
The Board concluded that the full amount of Morgan's
judgment was not compensable. It awarded him $5,120, the
purchase price of the car. Based on its prior practice and
interpretation of the statutes involved, it held that his
attorney's fees, court costs, and expert witness fees were not
compensable from the Fund. It further held that his repair
costs and loss of use/rental costs were merely incidental to
ownership and operation and did not result from fraud.
Morgan appealed the Board's decision to the trial court
pursuant to the Administrative Process Act, Code § 9-6.14:21.
The trial court ruled that Morgan was entitled to satisfaction
of his judgment by the Fund, including compensation for his
"actual damages" and attorney's fees as ascertained in his
lawsuit. It further held that the Board's decision was "not
substantially justified" and awarded Morgan attorney's fees and
costs under Code § 9-6.14:21 (recodified as Code § 2.2-4030). 4
However, it reconsidered its allowance of attorney's fees
pursuant to Code § 9-6.14:21. Recognizing that the Board had
4
See 2001 Va. Acts, c. 844.
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followed a long-standing practice and belief that the Fund could
not compensate for attorney's fees and costs, it held that
Morgan had failed to show that the Board's decision not to
compensate attorney's fees and costs was "not substantially
justified." It denied Morgan's request for interest on the
$15,000 award from the Fund.
II. PAYMENT OF ACTUAL DAMAGES, COURT COSTS, AND ATTORNEY'S FEES
The Motor Vehicle Transaction Recovery Fund Act provides,
in pertinent part:
Whenever any person is awarded a final
judgment . . . for (i) any loss or damage in
connection with the purchase or lease of a
motor vehicle by reason of any fraud
practiced on him or fraudulent
representation made to him by a licensed or
registered motor vehicle dealer or one of
dealer's salespersons . . . or (ii) any loss
or damage by reason of the violation by a
dealer or salesperson of any of the
provisions of this chapter in connection
with the purchase of a motor vehicle . . .
the judgment creditor may file a verified
claim with the Board, requesting payment
from the Fund of the amount unpaid on the
judgment.
Code § 46.2-1527.3 (emphasis added). The Act provides, in
relevant part:
If the judgment debt is not fully satisfied
. . . the Board shall make payment from the
Fund subject to the other limitations
contained in this article.
Excluded from the amount of any unpaid final
judgment on which a claim against the Fund
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is based shall be any sums representing
interest, or punitive or exemplary damages.
Code § 46.2-1527.5 (emphasis added). 5
Considering Morgan's claim against the Fund, the Board
reviewed the underlying judgment. It held that it was not
satisfied that his judgment against Aquia was based solely on
the grounds of fraud. It "carefully examined each item that was
included in the calculation of 'actual damages'" and decided
that some of those items related to routine ownership and
maintenance. Thus, it reduced the element of actual damages to
$5,120, the purchase price of the car. In so doing, the Board
exceeded its authority.
Morgan's lawsuit against Aquia was couched in terms of
fraud, violation of the Consumer Protection Act, and breach of
express and implied warranties. His case was tried and judgment
was rendered based on findings of "fraud," "fraudulent
representations," and "violations of the Motor Vehicle Act."
The court that rendered the judgment tried Morgan's allegations.
It assessed his actual damages as resulting from the proven
fraudulent conduct of Aquia. The Board had no authority to
retry those issues. Its duty was limited to satisfaction of the
judgment, subject to the statutory limit.
5
Morgan filed a claim against the Fund on or about May 25,
2000. At that time the statutory limit for recovering from the
Fund was $15,000. As a result, the current statutory recovery
limit, which was increased to $20,000 on July 1, 2001, is not
applicable.
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Noting that the Act makes no express provision for the
Fund's satisfaction of a judgment for attorney's fees and costs,
the Board adhered to its previous position that such elements of
a judgment could not be satisfied out of the Fund. In this, it
erred.
Code §§ 46.2-1527.3 and 46.2-1527.5 provide that a judgment
against a motor vehicle dealer for fraud shall be satisfied by
the Fund. "[T]he judgment creditor may file a verified claim
with the Board, requesting payment from the Fund of the amount
unpaid on the judgment." Code § 46.2-1527.3 (emphasis added).
"If the judgment debt is not fully satisfied . . . the Board
shall make payment from the Fund subject to the other
limitations contained in this article." Code § 46.2-1527.5
(emphasis added). Thus, the entire judgment against Aquia,
including actual damages, court costs, and attorney's fees, is
compensable by the Fund.
III. ATTORNEY'S FEES PURSUANT TO CODE § 9-6.14:21
Morgan contends that the trial court erred in denying his
request for attorney's fees and costs, pursuant to Code
§ 9-6.14:21. He argues the Board's position was "not
substantially justified." We disagree.
The Administrative Process Act outlines the criteria for
obtaining attorney's fees when a party contests an agency
action.
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A. In any civil case brought under Article
5 (§ 2.2-4025 et seq.) of this chapter or
§§ 2.2-4002, 2.2-4006, 2.2-4011, or
§ 2.2-4018, in which any person contests any
agency action, such person shall be entitled
to recover from that agency . . . reasonable
costs and attorneys' fees if such person
substantially prevails on the merits of the
case and the agency's position is not
substantially justified, unless special
circumstances would make an award unjust.
Code § 2.2-4030 (formerly Code § 9-6.14:21).
The trial court noted that the Board had adhered to its
long-standing practice and belief that the Fund could not
compensate attorney's fees and costs. The trial court held that
Morgan failed to prove that the Board's position was "not
substantially justified." The record supports that holding.
While the Board's position on compensability of a judgment
for attorney's fees and costs was rejected by the trial court
and is rejected by us, that position was substantially plausible
and was based on the Board's long-standing practice, which had
never been tested in court. The same is true of the Board's
review of Morgan's "actual damages." Consequently, Morgan is
not entitled to attorney's fees for the proceedings in the trial
court.
The judgment of the trial court is affirmed.
Affirmed.
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