Virginia Lawyers Weekly VA Lawyers Weekly
This court granted judgment by default against all three Defendants for $85,851, attorney’s fees, and costs. After the Plaintiffs attempted to execute the judgment several times, the Defendants moved to set aside the default judgment on four grounds. The court overrules three of those.
Service on individuals
Defendant Kianna Boone signed the promissory note at issue in this case in Portsmouth, and the real property involved is located in Suffolk. As this dispute arises out of the transaction of business in Virginia, the Plaintiffs served the Boones through the Secretary of the Commonwealth. That was proper.
The Plaintiffs were not required to effect service in accordance with Code
§ 8.01-296 (2)(b). That notice is required when a defendant is served by posting on the front door of his usual place of abode. That was not the mode of service the Plaintiffs used here, so the provision does not apply.
Service on corporate entity
The Plaintiffs attempted to serve Carol Boone, the LLC’s registered agent, at its registered office in Portsmouth. The return stated: “Suites A-K. Suite J is a mailbox store.” The Defendants allege that Suite J is actually a UPS Store, whose owner “and his employees have specific instructions to notify … Carol Boone if service of the LLC is attempted from a process server so she can make arrangements to accept service.”
This is not how a registered agent and office work. First, if an individual member of the LLC is to be the registered agent, she is to be a Virginia resident. Carol Boone resides in North Carolina. Second, the registered agent may by a notarized writing designate a natural person in her office upon whom process may be served. But the UPS Store is not Boone’s office.
One purpose of a registered agent and office is to provide certainty to a plaintiff that he has done what is required to give a defendant notice of the lawsuit. Boone’s catch-me-if-you-can arrangement with the UPS Store owner does not comply with the law. The Plaintiffs had no obligation to play her game, and service on the Clerk of the State Corporation Commission was proper.
Breach/unjust enrichment
The Plaintiffs claim they were damaged when the Defendants borrowed $75,000 from a third party and encumbered the Property with a deed of trust to secure that loan. The Plaintiffs never received a deed granting them a 55 percent interest in the Property.
The agreement is a masterpiece of ambiguity. Its operative provision is:
“THE PROPERTY LISTED AS 400-402 AND 404 SAINT JAMES AVE SUFFOLK VA 23434, CURRENTLY OWNED SOLELY BY 400 SAINT JAMES AVE LLC AGREE AS OF August 23, 2016 TO HAVE THE SECOND PARTY OWN 55% UNTIL LOAN PROCEEDS HA VE BEEN PAID IN FULL. UPON COMPLETION OF SAID LOAN, SECOND PARTY WILL OWN A 50% OWNERSHIP UNDER A NEW NAME OF CHOSE ….”
Both Boones signed it. After each of their printed names under the signature lines appears “400 Saint James Ave LLC,” but there is no designation such as “manager,” “member,” or “agent.” Thus, they are sufficiently alleged to be individually liable for breach of contract.
However, the LLC, not the Boones, owned the Property, so only the company could have been enriched by the Plaintiffs’ payment. Thus, the Plaintiffs have not sufficiently pled unjust enrichment against the Boones.
Fraud
The Plaintiffs claim the Defendants represented they would receive an interest in the Property, but the Defendants had no intention of granting it.
As the Virginia Supreme Court recently stated in CGI Fed. v. FCi Fed., No. 170617 (June 7, 2018), “a party making fraudulent representations cannot rely on the terms of a contract procured by fraud to defeat recovery in tort.” The Boones rely unpersuasively on the source-of-duty rule to bar this claim. There will always be an agreement between the parties in a case of promissory fraud, and if the existence of the agreement barred the tort, the tort would not exist. Promissory fraud arises out of a duty the law, not an agreement, imposes: Do not make a promise to induce another to rely on it when you have no present intention to fulfill it.
Howell v. Boone, Case No. CL17-8699-04, June 15, 2018. Norfolk Cir. Ct. (Martin). VLW No. 018-8-053, 5 pp.
