ANALYSIS OF NOVEMBER 25, 2020 SUPREME COURT OPINION

(Posted November 25, 2020) In the spirit of the holidays, the Robes by the banks of the James give us a gift in the form of a published opinion this morning. Today’s ruling in Sheehy v. Williams will fascinate appellate lawyers; the rest of you may want to stick to planning tomorrow’s menu. Even so, I’ll try to make the prose sparkle.

The facts underlying the judgment are largely immaterial to today’s dispute. Williams got a judgment against Sheehy in circuit court for about $51,000. The clerk duly docketed the judgment, creating a lien in favor of the creditor against any real estate that the debtor owned in the city.

The debtor did indeed own a home there. She noted an appeal and eventually got a writ. But while the appeal was pending, after the writ grant, the debtor contracted to sell her home.

Dirt lawyers know well that, to convey good title to the buyer, that lien has to be addressed. The home buyer’s lawyer, who served as the closing attorney for the sale, picked up the judgment in a title examination, since it’s within the chain of title. He wrote to the judgment creditor’s attorney, asking for a payoff figure for the judgment.

The creditor’s lawyer wrote back, specifying an exact payoff figure of about $54K. The closing attorney prepared the usual collection of checks, including a payoff for the judgment. He sent the creditor’s attorney a check for the full payoff amount, along with a copy of the letter in which he had provided the figure. Next to the circled payoff figure on that letter appeared a set of initials that correspond to the judgment debtor’s name.

Uh-oh. The creditor’s appellate lawyer is no schnook; he immediately recognized that the debtor had evidently authorized a voluntary payment of the judgment. Under well-established Virginia caselaw, doing that moots the appeal. The debtor can still pursue the appeal if the payment is involuntary – for example, the creditor has obtained a garnishment summons or has initiated a creditor’s bill to sell real estate. But here, no one had forced the debtor to act; she just wanted to sell her home.

The creditor moved the Supreme Court to dismiss the appeal as moot. A month later, the parties presented oral argument on the merits to the full court. As you can imagine, the judgment payoff was the primary topic of discussion. At one point, Justice Kelsey directly asked the debtor’s lawyer if the debtor authorized the payoff. The lawyer said he didn’t know.

This puts the appeal in a perplexing posture. The potentially fatal event occurred well outside the trial-court record. The justices have only the appellate lawyers’ representations about what had happened a month before. Finding that that’s not enough to go on, the court takes the rare step of holding the appeal in abeyance and temporarily remanding the case to circuit court for factfinding on the circumstances of the payoff. Today’s opinion posits eight specific questions for the court to address. But the language of the opinion telegraphs clearly that if the facts come out as one would expect, the justices will eventually dismiss this appeal under the voluntary-payment doctrine.

What could the debtor have done to preserve her appeal here? Again, for dirt lawyers, there’s an easy answer: an escrow agreement. The debtor could have approached the creditor and asked for an arrangement whereby someone – possibly the closing attorney, who didn’t represent either party to this appeal – would hold the money in trust, awaiting the outcome of an appeal. For the creditor, that’s the functional equivalent of a supersedeas bond, making collection easy in the event of an appellate win. For the debtor, it allows her to sell her house without punting the appeal. But that’s not what happened.

This circumstance isn’t likely to occur often. But for appellate lawyers, this is an important refinement of the voluntary-payment doctrine.