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Virginia Polytechnic Institute and State University v. Prosper Financial

September 14, 2012

VIRGINIA POLYTECHNIC INSTITUTE AND STATE UNIVERSITY
v.
PROSPER FINANCIAL, INC.



FROM THE CIRCUIT COURT OF MONTGOMERY COUNTY Robert M. D. Turk, Judge

The opinion of the court was delivered by: Senior Justice Elizabeth B. Lacy

Present: Kinser, C.J., Lemons, Goodwyn, Millette, Mims and Powell, JJ., and Lacy, S.J.

OPINION BY SENIOR JUSTICE ELIZABETH B. LACY

In this appeal we consider whether the trial court erred in setting aside a default judgment in an action filed pursuant to Code § 8.01-428(D).

Background

In 2008, Virginia Polytechnic Institute and State University ("VPI") and Prosper Financial, Inc. ("Prosper") entered into a research contract. The contract between the parties stated, on the first page, that Prosper had offices at 4801 Alhambra Circle, Coral Gables, Florida 33146. Another provision of the contract provided that "[a]ny notices required to be given or which shall be given" to Prosper under the contract should be addressed to P.O. Box 331916, Miami, Florida 33233-1916.

In 2010, VPI filed a complaint in the Circuit Court of Montgomery County, Virginia claiming that Prosper breached the 2008 contract. Because Prosper was a Florida corporation, VPI sought to effect service of process through the company's statutory agent, the Secretary of the Commonwealth. See Code

§§ 8.01-301(3) and -329(A). In its affidavit for service of process on the Secretary of the Commonwealth, VPI stated that Prosper was a foreign corporation and listed the post office box address contained in the notice provision of the contract as Prosper's last known address. The Secretary of the Commonwealth filed a Certificate of Compliance certifying that the complaint and summons had been sent by certified mail, return receipt requested, to Prosper at the post office box address. See Code § 8.01-329(C). Prosper did not file responsive pleadings and, on VPI's motion, the trial court entered a default judgment for $783,408.72 against Prosper on June 8, 2010.

In 2011, Prosper filed a motion pursuant to subsection (A) of Code § 8.01-428 asking the trial court to vacate the default judgment order. Prosper alleged that the default judgment was void or voidable for failure to comply with the requirements for service of process established by Code § 8.01-329. At the same time, Prosper filed an independent action pursuant to subsection

(D) of Code § 8.01-428 raising the same allegations and asking for the same relief. The trial court held a single hearing to consider both the motion and the independent action.

At the hearing, Prosper argued that VPI's affidavit to the Secretary of the Commonwealth for substituted service was defective because it identified as Prosper's last known address only one of the two addresses contained in the contract. According to Prosper, identification of both addresses was required under Code § 8.01-329(B). Therefore, according to Prosper, the service of process was void ab initio and the trial court did not have jurisdiction over Prosper when it entered the default judgment order. Prosper also asserted that the failure to list both addresses constituted fraud or fraud on the trial court.

VPI responded that it met the requirements of Code § 8.01-329 for service of process on Prosper and when the Certificate of Compliance was filed, service on Prosper was complete and conclusive. VPI argued that the address it specified in its affidavit was the address listed in the notice provision of the contract between the parties and was the address the parties had used for correspondence and billing purposes during the contract period. Therefore, VPI maintained that it met the requirements of Code § 8.01-329(B) and was not required to list both addresses. VPI also argued that it did not commit fraud or fraud upon the trial court by listing only the single address in its affidavit.

Following the argument of counsel, the trial court determined that the order of default judgment should be set aside stating that "due diligence in this instance, if there's two addresses, [service of process] should have been attempted at both addresses." At a subsequent hearing to clarify the basis for the ruling, the trial court stated that VPI "owed the duty, based upon the size of this suit and the nature of the suit, to try to serve both places" but that there was not "necessarily any type of fraud . . . ." The trial court stated that "people deserve their day in court" and that "it's fundamental fairness for everybody that we overturn that default judgment, and . . . proceed on where this thing really ought to go." The trial court expressly declined to determine if the order of default judgment should be set aside as void stating "[w]hether it's void or not, I don't know." The trial court entered an order in the independent action setting aside the order of default judgment for the reasons stated at the hearings. The trial court also entered an order granting Prosper's motion to vacate the default judgment. The trial court did not differentiate the grounds on which it vacated the order of default judgment based on the nature of the proceeding

(i.e., the motion to vacate or the independent action to vacate). VPI filed this appeal from the judgment ...


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