COURT OF APPEALS OF VIRGINIA
Present: Judges Benton, Coleman and Humphreys
Argued by teleconference
CDM ENTERPRISES, INC.,
T/A COLONIAL HOMES CENTER
OPINION BY
v. Record No. 0986-99-2 JUDGE ROBERT J. HUMPHREYS
JULY 5, 2000
COMMONWEALTH OF VIRGINIA/
MANUFACTURED HOUSING BOARD,
DEFOREST REED AND LINDA REED
FROM THE CIRCUIT COURT OF HALIFAX COUNTY
Charles L. McCormick, III, Judge
Alan T. Gravitt (Gravitt & Gravitt, P.C., on
brief), for appellant.
Lisa Rowley, Assistant Attorney General
(Mark L. Earley, Attorney General; John B.
Purcell, Jr., Assistant Attorney General, on
brief), for appellee Commonwealth of
Virginia/Manufactured Housing Board.
No brief or argument for appellees Deforest
Reed and Linda Reed.
CDM Enterprises, Inc., trading as Colonial Homes Center
(Colonial), appeals from a decision of the Circuit Court of
Halifax County (circuit court) upholding a decision of the
Virginia Manufactured Housing Board (Board). On appeal, Colonial
contends the circuit court erred in failing to find that the
doctrines of res judicata and collateral estoppel barred recovery.
Colonial further asserts that, in any event, the Board lacked
statutory authority to order payment from the Manufactured
Housing Transaction Recovery Fund (Fund) for violation of a
regulation adopted by the Board. For the reasons that follow,
we reverse the decision of the circuit court.
I.
On August 1, 1996, Deforest and Linda Reed entered into a
contract to purchase a manufactured home from Colonial. The
home they purchased was displayed on Colonial's lot with a
wooden deck outside the patio doors. At the Reeds' request,
Colonial included a deck and set-up and delivery in the contract
for the home. The deck used by Colonial for display purposes,
which was constructed with untreated lumber, was dismantled and
delivered with the home, but was not installed by Colonial.
The Reeds filed a complaint with the Board seeking
$1,510.12 from the Fund for the cost of hiring a contractor to
install a deck. After holding an informal fact-finding
conference, the Board issued a decision finding Colonial liable
to the Reeds for $500 for its failure to set up and install the
deck. The order, styled DeForest and Linda Reed v. Colonial
Homes Center and Don Woodward, President, also provided that if
Colonial failed to pay that sum to the Reeds, payment would be
made from the Fund. Payment from the Fund to satisfy this
"judgment" would result, by operation of law, in the revocation
of Colonial's license to sell manufactured housing in the
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Commonwealth. 1 Colonial filed a timely appeal of the Board's
decision to the circuit court, pursuant to the Virginia
Administrative Process Act. See Code § 9-6.14:1, et seq. That
appeal was styled CDM Enterprises, Inc., t/a Colonial Homes
Center v. Virginia Manufactured Housing Board and DeForest Reed
and Linda Reed.
While the appeal of the Board's decision was pending in the
circuit court, Linda Reed filed suit against Colonial in the
General District Court of Halifax County (general district
court) seeking damages in the amount of $2,000. Among the items
for which recovery was sought was $1,510.12 for the cost of
hiring a contractor to construct and install the deck.
Linda Reed's case was heard in general district court on
January 4, 1999. After hearing evidence, including testimony
from an employee of the Board, the judge "determined that
[Colonial] was not responsible to repair or build a new deck."
The judge then took the matter under advisement until
February 8, 1999, to give Colonial time to make certain repairs
to the Reeds' home. While the matter was still pending in
general district court, counsel for the Board wrote a letter to
1
Under Code § 36-85.32, once the Board rules in favor of a
claimant, the regulant has thirty days to pay the claim. If the
claim is not paid within that period of time, the claimant is
paid out of the Fund. The regulant's license is then suspended
until the regulant reimburses the fund for the money paid to the
claimant. See Code § 36-85.33.
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the clerk of the general district court requesting that she
advise the judge that the appeal of the Board's decision was
pending in the circuit court. The general district court
entered an order dismissing the case on February 8, 1999. Linda
Reed did not appeal the court's ruling.
On March 2, 1999, Colonial filed a motion to dismiss in the
circuit court, citing the resolution of the matter in the
general district court and the finality of that judgment. The
circuit court denied the motion to dismiss and upheld the
finding of the Board and its authority to direct payment to the
Reeds for Colonial's failure to install the deck.
II.
Colonial argues on appeal that under the doctrines of
res judicata and collateral estoppel, the finding of the general
district court and its dismissal of Linda Reed's action barred
any recovery through the appeal pending in the circuit court.
Res judicata and collateral estoppel, though similar, are
distinct legal doctrines. "'Res judicata is a judicially
created doctrine founded upon the considerations of public
policy which favor certainty in the establishment of legal
relations, demand an end to litigation, and seek to prevent
harassment of parties.'" Highsmith v. Commonwealth, 25 Va. App.
434, 439, 489 S.E.2d 239, 241 (1997) (citation omitted).
Res judicata, which literally means a "matter adjudged,"
precludes relitigation of a cause of action once a final
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determination on the merits has been reached by a court of
competent jurisdiction. See id. Collateral estoppel, by
contrast, bars relitigation of the same issue of fact in a
different cause of action. See Bates v. Devers, 214 Va. 667,
670-71, 202 S.E.2d 917, 921 (1974); In Re Ansari, 113 F.3d 17,
23 (4th Cir. 1997).
In the present case, we have identical causes of action,
that is, the Reeds' claims against Colonial for compensatory
damages for its failure to install the deck. Accordingly,
res judicata is the appropriate doctrine to be applied.
A person seeking to assert res judicata as a defense must
establish that in both actions there was an identity of: (1)
the remedies sought; (2) the cause of action; (3) the parties;
and (4) the quality of the persons for or against whom the claim
is made. See Commonwealth ex rel. Gray v. Johnson, 7 Va. App.
614, 618, 376 S.E.2d 787, 789 (1989). The asserting party must
also establish that "the judgment in the former action [was]
rendered on the merits by a court of competent jurisdiction."
Simmons v. Commonwealth, 252 Va. 118, 120, 475 S.E.2d 806, 807
(1996). Finally, the judgment relied upon must be final, and a
judgment is not final for res judicata purposes if it is being
appealed. See Faison v. Hudson, 243 Va. 413, 419, 417 S.E.2d
302, 305 (1992).
Here, the general district court's dismissal of the suit
after considering evidence and with a specific finding that
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Colonial was not liable for the installation of the deck was a
judgment on the merits that became final twenty-one days after
its entry by the court on February 8, 1999. At that time, the
decision of the Board was not yet final by virtue of the appeal
of its decision pending in the circuit court.
The Board argues that the doctrine of res judicata is
inapplicable because there was no identity of parties in the two
actions. The parties to the case then pending in the circuit
court were Colonial, the Board, and the Reeds. The parties in
the case decided in the general district court were Linda Reed
and Colonial.
The doctrine of res judicata applies not only to the actual
parties in a case but also to those in privity with them. See
City of Virginia Beach v. Harris, 259 Va. 220, 229, 523 S.E.2d
239, 243 (2000). In other words, res judicata applies to anyone
"'so identified in interest with [a party] that he represents
the same legal right, precisely the same question, particular
controversy, or issue.'" Johnson, 7 Va. App. at 618, 376 S.E.2d
at 788 (citation omitted).
Applying this standard, we find that Deforest Reed, though
not a party in the suit in general district court, was in
privity with his wife, insofar as the claim that was decided in
that case is concerned.
Colonial argues that the Board was likewise in privity with
Linda Reed with respect to the issues decided on the merits in
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the general district court. Colonial contends the Board "acted
like a party" in that proceeding because an employee of the
Board testified as a witness on behalf of Linda Reed and counsel
to the Board sent a letter to the clerk of the general district
court requesting that she apprise the judge of the pending case
in circuit court.
We disagree with this reasoning. The Board in exercising
its regulatory authority did not share the rights or remedies
available to the Reeds. That fact did not change merely because
a Board employee testified as a witness and its counsel
corresponded with the court. See Unemployment Comp. Comm'n v.
Harvey, 179 Va. 202, 210, 18 S.E.2d 390, 393-94 (1942) (holding
that an employer's interest in, presence at, and participation
in a hearing on her former employee's claim for unemployment
benefits did not render the employer a party to that
proceeding).
It remains to be decided whether the doctrine of
res judicata is applicable where the parties or their privies in
one case represent a subset of the parties in another case. We
find that it is, insofar as the parties common to both cases are
concerned. "'[T]he naming of additional parties does not
eliminate the res judicata effect of a prior judgment so long as
. . . the party against whom the doctrine is asserted was a
party to the former litigation.'" United States ex rel.
Robinson Rancheria Citizens Council v. Borneo, Inc., 971 F.2d
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244, 249 (9th Cir. 1992) (quoting Dreyfus v. First Nat'l Bank of
Chicago, 424 F.2d 1171, 1175 (7th Cir. 1970)). See Broughton v.
Merchants Nat'l Bank of Mobile, 476 So. 2d 97, 102 (Ala. 1985);
Waggaman v. Franklin Life Ins. Co., 458 S.E.2d 826, 827-28 (Ga.
1995); 50 C.J.S. Judgment § 848 (1997) (noting that this rule is
especially applicable where the additional party to the
subsequent action was a "merely formal, nominal or unnecessary"
party). Thus, the addition of the Board as a party in the
administrative appeal did not affect the preclusive effect of
the general district court judgment between Colonial and the
Reeds.
The Board notes correctly that if there is no privity
between the Board and Linda Reed, the doctrine of res judicata
cannot bind the Board to the general district court's decision.
Under the facts of this case, however, the fact that the Board
was neither a party to the district court proceeding nor a privy
of Linda Reed is immaterial.
The Board's authority to seek payment from and discipline
Colonial flowed from the rights of the Reeds as claimants. If
the Reeds prevailed against Colonial, the Board was responsible
for enforcing the "judgment." The Reeds would be paid out of
the Fund only if Colonial failed to pay the claim within thirty
days. Moreover, recovery from the Fund is conditional on
claimants assigning all their rights and claims against the
regulant, see Code § 36-85.32(3), and subrogating to the Board
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all their rights to the extent of payment. See Code
§ 36-85.32(4).
Once the general district court judgment became final, the
doctrine of res judicata controlled the disposition of any
future claim that Colonial was liable to the Reeds for the cost
of the deck.
"When an administrative agency is acting in
a judicial capacity and resolves disputed
issues of fact properly before it which the
parties have had an adequate opportunity to
litigate, the courts have not hesitated to
apply res judicata to enforce repose."
United States v. Utah Constr. & Mining Co.,
384 U.S. 394, 422 (1966) (superseded by
statute on other grounds); see also Astoria
Federal Sav. and Loan Ass'n v. Solimino, 501
U.S. 104, 107 (1991) (noting the presumption
in favor of the Utah Constr. & Mining rule,
absent contrary congressional intent);
University of Tennessee v. Elliott, 478 U.S.
788, 797 (1986) (holding that the factual
findings of federal agencies functioning in
an appropriately judicial capacity enjoy
preclusive effect in federal courts);
Restatement (Second) of Judgments § 83
(1980); 2 Kenneth C. Davis & Richard J.
Pierce, Jr., Administrative Law Treatise
§ 13.3, at 248-59 (3d ed. 1994).
Jones v. SEC, 115 F.3d 1173, 1178 (4th Cir. 1997). Cf. Zappulla
v. Crown, 239 Va. 566, 571, 391 S.E.2d 65, 68 (1990) (ruling
that "[b]ecause the [Marine Resources Commission] lacked
authority to determine the riparian rights of the parties
inter se, its action in granting a permit has no res judicata
effect upon the claims asserted in the present case").
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While the Board was not a party to the judicial proceeding,
it could not through its regulatory authority render a decision
on an identical claim between other parties that has been
precluded by the doctrine of res judicata. 2 This result is
consistent with the rationale behind the doctrine of
res judicata. Accordingly, the trial court erred when it
rejected Colonial's plea of res judicata.
III.
Because we find that the doctrine of res judicata was
applicable to this matter, we need not decide the issue of the
scope of the Board's authority to order payment from the Fund
for violation of regulations adopted by the Board.
The judgment of the circuit court is reversed, and the case
is remanded for further proceedings consistent with this
opinion.
Reversed and remanded.
2
Once the Board paid the Reeds from the Fund, as assignees
of the Reeds, the Board's rights would be no greater than the
Reeds'. See Fidelity & Cas. Co. of N.Y. v. First Nat'l Exchange
Bank of Va., 213 Va. 531, 538, 193 S.E.2d 678, 684 (1973) (an
assignee has no greater rights than its assignor); but see
Kirwan & Co. v. Pelletier-Baker, 250 Va. 238, 241, 462 S.E.2d
89, 90-91 (1995) (an assignee is not bound by an adverse
adjudication against the assignor, after the assignment).
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