City-To-City Auto Sales, LLC v. Harris

• Docket Number: 0728-22-2
• Decision Date: 29 August 2023
• Parties: CITY-TO-CITY AUTO SALES, LLC, ET AL. v. RONALD HARRIS
• Court: Court of Appeals of Virginia

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CITY-TO-CITY AUTO SALES, LLC, ET AL.
v.
RONALD HARRIS

No. 0728-22-2

Court of Appeals of Virginia

August 29, 2023

FROM THE CIRCUIT COURT OF HENRICO COUNTY Rondelle D. Herman, Judge

Christopher T. Holinger (Mary T. Morgan; Golightly Mulligan & Morgan, PLC, on briefs), for appellants.

Henry W. McLaughlin (The Law Office of Henry McLaughlin, P.C., on brief), for appellee.

Present: Chief Judge Decker, Judges Malveaux and Causey Argued at Richmond, Virginia

OPINION

MARLA GRAFF DECKER, CHIEF JUDGE.

City-to-City Auto Sales, LLC, and Omar White^[1] appeal the circuit court's grant of default judgment against them and awards of damages and attorney fees. For the following reasons, we affirm the decision of the circuit court.

Background^[2]

In August 2020, the appellee went to City-to-City Auto Sales to discuss purchasing a truck. The appellee informed White, City-to-City's sales manager and principal, that he "was starting a car hauling business and needed a reliable diesel commercial truck." White recommended a particular truck, falsely telling the appellee that he would get a "diagnostic done

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on the engine and transmission." The appellee made an initial payment of $3,000 to White, who then proceeded to bid on the recommended truck. White won the bid and obtained the vehicle for the appellee. He then told the appellee that the diagnostic check indicated an issue with the vehicle's air conditioning system but that otherwise it had no known mechanical problems. Based on this representation, the appellee signed a sales contract agreeing to buy the truck for approximately $43,000.

The contract included an arbitration provision. Through that provision, the parties agreed that "[a]ny [d]ispute shall, at [the appellee's] or [City-to-City Auto Sales]'s request, be resolved by binding arbitration and not in court." The agreement defined a "[d]ispute" as "any contract, tort, statutory or other claim . . . between [buyer] and [s]eller arising out of or relating to . . . this contract."^[3]

The appellee started to experience problems with the truck almost immediately after taking possession. It had issues with its wheel alignment, suspension, and emission system. It also had dirty oil, transmission fluid, and differential fluid. Less than a month after the purchase, the truck's engine failed.

In late April 2021, approximately eight months after taking possession of the truck, the appellee filed a complaint in the circuit court against the appellants, alleging fraud in a transaction for the purchase of a vehicle. It made no mention of the parties' sales contract, and the contract was not attached to the pleading. The complaint was served on White on May 3, 2021.

By June 10, 2021, the appellants had not filed responsive pleadings, and the appellee filed a motion for default judgment. At a hearing on that motion on July 23, 2021, the

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appellants, by counsel, appeared with a proposed answer to the complaint. Counsel argued against the motion for default judgment and asked for leave to file a late answer on two grounds: (1) service on City-to-City Auto Sales was defective, and (2) neither appellant ever received notice of the motion for default judgment.

The circuit court rejected the motion for leave to file a late answer on the grounds that no good cause was shown for filing a late response and any defect in service of the complaint on City-to-City Auto Sales was cured by personal service on White. The court granted the appellee's motion for default judgment and entered an order setting the case for trial solely on the issue of damages.

Within twenty-one days, on August 13, 2021, the appellants filed a motion to set aside the default judgment, accompanied by a motion to compel arbitration. At that time, the appellants presented the sales contract to the court and argued that the arbitration provision within it was governed by the Virginia Uniform Arbitration Act. The appellee objected to those motions in writing.

On January 13, 2022, the appellants filed a motion to continue the jury trial on damages in order for the court to hold a hearing on the motions to set aside the default judgment and to compel arbitration. After hearing arguments, the court denied the motion to continue because it "came too late and would cause und[ue] delay in the proceedings." At that time, the court also denied the appellants' pending motions to set aside the default judgment and send the case to arbitration.

Before trial began on January 25, 2022, the appellants renewed the motion to compel arbitration. They proffered that they were willing to pay for the costs of the jurors, the appellee's attorney fees for the day of trial, and the arbitration itself. Nonetheless, the circuit court again denied the motion on the ground that it "came too late."

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Proceeding with a jury trial on the question of damages, both sides presented evidence. At the close of the appellee's case-in-chief, the appellants made a motion to strike the evidence. They argued that the appellee did not show any actual economic damages, lost revenue, or emotional damages sufficient to justify an award. At the close of all the evidence, the circuit court denied the appellants' renewed motion to strike. After closing arguments, the appellants moved for a mistrial based on allegedly improper closing argument by the appellee's counsel. The appellants contended that the appellee's counsel had encouraged the jury to consider statements made by White on direct examination that were stricken from the record. The court concluded that the objection was untimely and overruled it.

The jury returned a verdict for the appellee, awarding him $33,000 in compensatory damages and $50,000 in punitive damages. The appellants made motions for a mistrial and to set aside the verdict. The court denied both motions. It also granted the appellee's motion for attorney fees and awarded him $6,450.

The appellants noted several objections to the circuit court's final order, filed a motion to stay, and made a motion to reconsider and set aside the judgment. The court denied those motions.

Analysis

The appellants challenge the circuit court's decision to not enforce the arbitration provision in the sales contract. They also appeal the awards of compensatory and punitive damages. Finally, the appellants argue that the circuit court erred by awarding attorney fees to the appellee.

I. Arbitration Provision

The appellants contend that the circuit court erred in refusing to set aside the default judgment and refer the matter to arbitration.

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The decision "to relieve a defendant of a default judgment under Rule 3:19(d)(1) rests within the sound discretion...