Summaries of 2006-2021 Changes

• Library: Debt Collection for Virginia Lawyers: A Systematic Approach (Virginia CLE) (2022 Ed.)

SUMMARY OF 2006 CHANGES

OVERVIEW

The year 2006 was very quiet legislatively. This is due in large part to the retirement from the House of Delegates of Representative Gary Reese. Mr. Reese has been the sponsor of much of the recent legislation that has greatly benefited creditors and landlords. Legislation enacted in 2006 tended to benefit plaintiffs, but its effect was marginal.

Four statutes pertained to actual litigation:

Plaintiffs are no longer required to post bond when removing a case to the circuit court;

Plaintiffs have an absolute right of nonsuit in cases where the defendant has not been properly served;

In unlawful detainer actions, a landlord entitled to bad check damages may recover those damages in the unlawful detainer action without having to file a separate suit on the check itself; and

The jurisdictional limits of small claims court has been increased substantially, benefiting pro se litigants.

In response to two cases favoring defendants, the General Assembly enacted rules making it more difficult for a debtor to discharge a contested claim by sending a check marked "paid in full."

A lien was created for companies that tow and store vehicles for municipalities or other third parties.

The only legislation that benefited defendants imposed limitations on the use and duration of written agreements not to claim the statute of limitations.

Three "housekeeping" bills were enacted that

1. Added a check-off box to Form DC-450 (Suggestion for Summons in Garnishment) that alerts the co-defendant when the plaintiff is seeking to garnishee anything other than wages;

2. Raised court costs in all actions in general district courts and circuit courts in order to finance the technology fund of the Supreme Court of Virginia; and

3. Limited the rule requiring pro se parties to inform the court and other parties of an address change to parties that actually make an appearance in the case.

Court decisions in 2006 revealed no clear trend in favor of either party. Creditors benefited from a bankruptcy court decision, and both sides benefited from several Virginia Supreme Court decisions, including an unusual case in which the court had to resolve two federal bankruptcy issues.

Nonsuits were the topic of the year, with at least four cases bearing on the issue.

The United States Bankruptcy Court ruled that there is no statute of limitations on repayment of government-guaranteed student loans.

The Supreme Court of Virginia (i) discussed the defendant's burden in seeking to vacate a default judgment based on an allegation of fraud upon the court; (ii) distinguished a new case on its facts from Grimes v. Suzukawa, 262 Va. 330, 551 S.E.2d 644 (2001) (a masked assailant was not wearing the mask in order to hinder the plaintiff's attempt to file suit), in a manner which virtually overrules the original case; (iii) ruled that filing an answer in circuit court is a general appearance that waives any defects in service of process pursuant to the one-year rule; (iv) upheld the plaintiff's right of nonsuit even after a motion has been filed pursuant to the one-year rule; (v) held that a case that is before the court on a dispositive motion or on the merits, once "submitted," may not be nonsuited; (vi) allowed a nonsuit—actually, a second nonsuit—without notice to unserved parties; (viii) ruled that filing a Chapter 11 bankruptcy does not toll the statute of limitations as to sureties and that the assumption of a lease in bankruptcy does not act as a written waiver of the statute of limitations; (ix) ruled that in cases filed under the Condominium Act, the prevailing party may recover "reasonable" attorney fees; and (x) extended the rule concerning de novo trials in the circuit court.

Defendants also benefited from several Virginia Supreme Court rulings. The court (i) made it clear that a nonsuit does not stop the defendant from pursuing motions for sanctions; (ii) found that a suit filed by an attorney who had been suspended from practice is a nullity and, accordingly, there is nothing from which a nonsuit can be taken, so the statute of limitations will continue to run; and (iii) strengthened the "paid in full" by check defense (although the General Assembly promptly undid some of this).

Circuit courts made a few rulings that were helpful, or at least instructive, to plaintiffs/creditors, including the following:

1. A reminder that when seeking to remove a case to federal court, counsel should first file pleadings in state court in case the removal fails;

2. A discussion of the defendant's heavy burden of proof when attempting to vacate a judgment on the basis of accord and satisfaction;

3. A primer on the use of section 38.2-2206(G) for John Doe suits in motor vehicle cases, discussing the best way to use the section to extend the statute of limitations and the use of nonsuits in this type of action; and

4. A creditor-friendly case on garnishment, in which the defense of tenancy by the entireties was raised, along with an equally favorable decision concerning commingled checking accounts.

Debtor/defendants were aided by a number of circuit court rulings, including the following:

1. An important decision limiting long-arm jurisdiction over a disputed contract initiated by an Internet auction;

2. A further restriction of the right to a second nonsuit, even though the case was initiated by a party in a representative capacity;

3. A ruling that an outstanding settlement offer does not expire simply because the statute of limitations has run on the underlying case;

4. A ruling that a case filed by an attorney not licensed in Virginia is a nullity and that the filing by that attorney does not toll the statute of limitations; and

5. A reminder that an order dismissing a case "with prejudice" terminates all proceedings in the matter and further actions, even collateral actions, are barred.

LEGISLATION

Legislative Changes That Benefit Creditors/Plaintiffs

Section 8.01-277(B) provides a defendant who has not been served within one year an opportunity to make a special appearance and file a motion to dismiss the case. If the defendant prevails on the motion, and if the plaintiff did not use due diligence in obtaining service, the case is to be dismissed with prejudice. However, this provision has several traps for unwary defendants and is actually a plaintiff-oriented statute. (See ¶¶ 6.801, 7.1103(C), (D).)

Section 8.3A-311 was amended in response to the ruling in Sexton v. Cornett, 271 Va. 251, 623 S.E.2d 898 (2006). A check paying off a loan agreement, if for less than the full amount due, must be tendered to someone with a knowledge of the nature of any dispute between the parties. If not so tendered, the payor fails the "good faith" test. (See ¶ 6.4.)

Section 16.1-107 eliminates the requirement that a plaintiff post a security bond when appealing a case to circuit court, except in cases in which a counterclaim has been filed. (See ¶ 7.1402.)

Sections 16.1-122.2 and -122.3 increase the jurisdiction of small claims court from $2,000 to $5,000. These sections are very helpful to pro se plaintiffs. (See ¶¶ 7.603, 7.24.)

Section 43-32, which provides a lien to livery stables, garages, and marinas for keeping, supporting, storage, and care of items left with them, now includes a lien for companies that tow and store vehicles when the action was requested by a third party, including a municipality. (See ¶¶ 13.3, 13.5.)

Section 55-248.31(F) permits a landlord in an unlawful detainer proceeding to recover bad check charges without having to file a separate suit. (See ¶ 2.108(B).)

Legislative Change That Benefits Debtors/Defendants

Section 8.01-232 imposes limits on an agreement not to plead the statute of limitations. The agreement must (i) be made to resolve or defer litigation; (ii) not be made in connection with any other contract; and (iii) not prescribe a waiver period longer than the original statute of limitation for the subject agreement. (See ¶¶ 2.503, 5.5, 6.6, 6.10; Appendix 2-1.)

Legislative Changes That Favor Neither Party

Sections 8.01-501 and -514 extend the life of a writ of fieri facias to 180 days to coincide with the period for which a judgment creditor can maintain a wage garnishment. (See ¶ 8.102.)

Sections 8.01-511 and -512.3 require that the plaintiff in a garnishment proceeding warn the garnishee that the plaintiff is trying to reach funds other than employee wages or other compensation. Official Forms DC-450 and -451 have been revised to include check-off boxes for this purpose. (See ¶ 8.305; Appendices 8-19, 8-20.)

Section 8.3A-118.1 creates a six-year statute of limitations on deposit accounts in financial institutions and on bank certificates of deposit. It also sets forth various events that can commence the limitations period. (See ¶ 2.102(v).)

Sections 16.1-69.48:2 and 17.1-275 raise general district court and circuit court filing fees by $10.00 per action, including the fee for filing an execution. Pursuant to section 17.1-132, all of the increase in fees will be used by the Supreme Court of Virginia to update the judiciary's telecommunications and technology systems. (See ¶¶ 3.2, 7.403, 8.302; Appendix 7-2.)

Section 16.1-88.03(D), which requires that pro se parties update the court and the other parties of an address change that occurs during the pendency of the case, was amended to make it clear that the rule only applies to parties that actually made an appearance in the case. (See ¶ 7.1106(B).)

CASE LAW

Cases Benefiting Plaintiffs

United States Bankruptcy Court

Thompson v. New Mexico Student Loan Guarantee Corp. (In re Thompson), 329 B.R. 145 (Bankr. E.D. Va. 2005). There is no statute of limitations on repayment of government-guaranteed student loans. (See ¶ 2.102.)

Supreme Court of Virginia

Newman v. Walker, 270 Va. 291, 618 S.E.2d 336 (2005). While not expressly overruling Grimes v. Suzukawa, 262 Va. 330, 551 S.E.2d 644 (2001), this case distinguishes Grimes on its facts and minimizes its effect...