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JOYCE GREEN, ET AL. v. OPINION BY JUSTICE CYNTHIA D. KINSER June 10, 2004 GOODMAN-GABLE-GOULD COMPANY, INC., ET AL. FROM THE CIRCUIT COURT OF FAIRFAX COUNTY Leslie M. Alden, Judge Record No. 032106

In this appeal, we address the appropriate use of declaratory judgments. Because we conclude that the

declaratory relief requested in this action was a determination of a disputed issue rather than an adjudication of the parties' rights, we will reverse the judgment of the circuit court granting declaratory relief. MATERIAL FACTS AND PROCEEDINGS A residence owned by Joyce E. Green and John W. Gural (collectively, the "Homeowners") was destroyed by fire. A

few days after the fire, the Homeowners decided to engage the services of Goodman-Gable-Gould Company, Inc. ("GGG"), a public insurance adjusting company, to assist them in processing their fire loss claim with Allstate Insurance Company ("Allstate"), the company that had issued the policy insuring the Homeowners' residence and personal property. The Homeowners contacted James Goodman, a

representative of GGG who had approached them at the fire

about the services offered by GGG.1

Goodman met with the

Homeowners at the hotel where they were temporarily staying. After Goodman explained a proposed contract to

the Homeowners, Gural executed the one-page contract.2 In pertinent part, the contract provided that the Homeowners were employing "Goodman-Gable-Gould/Adjusters International" to assist them in adjusting the fire loss claim with Allstate. GGG was "authorized to prepare all

necessary inventories and other applicable and/or required instruments to comply with the provisions" of the Allstate policy. In return for GGG's services, the Homeowners

agreed to pay GGG a fee of ten percent of "the gross amount adjusted or otherwise recovered." The Homeowners also

assigned to GGG "all moneys due or to become due from" Allstate to the extent of GGG's fee. Gural also executed

an addendum to the contract that required GGG to waive that portion of its fee relating to rebuilding the Homeowners'

According to Goodman, GGG learns about fires, floods, and tornadoes via several paging systems. Upon receiving a page about a particular disaster, GGG decides whether it is of sufficient magnitude to warrant further investigation. The parties stipulated at trial that Green was a party to the contract with GGG and had ratified that contract even though she did not sign it. 2
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residence if they elected to retain Rolyn Construction for that purpose. The Homeowners eventually became dissatisfied with the manner in which GGG was performing its contractual obligations. Consequently, they authorized their attorney

to request that GGG withdraw from the adjustment of the fire loss claim with Allstate. purpose stated: On behalf of Joyce Green and John Gural, we request that you and your firm withdraw from this matter and allow us to deal directly with Allstate. We appreciate your assistance, and will call you if your assistance is needed again. When our clients' claim is paid, we will notify you and discuss your fee. Following receipt of the letter, GGG advised the Homeowners' counsel that GGG did not agree with the request to "withdraw." In a letter to Allstate, GGG demanded that A letter to GGG for that

Allstate include GGG as an additional payee on any check issued on the Homeowners' claim. GGG also asserted that it

had a lien interest in the insurance proceeds and Allstate had an obligation to honor the Homeowners' assignment of funds. This litigation then ensued.

In a motion for judgment naming the Homeowners and Allstate as defendants, GGG sought a declaratory judgment that, inter alia, GGG had an interest in the insurance 3

proceeds and that it was owed a fee of ten percent of those proceeds. GGG also sought monetary damages in claims for

breach of contract and quantum meruit against the Homeowners, and in a conversion claim against Allstate. Trial of the case was set to commence on Monday, April 28, 2003. On the Wednesday before the scheduled trial, GGG

served a motion to nonsuit all the claims except those seeking declaratory relief and to waive a jury trial on the remaining issues. GGG's stated reason for filing this

motion was the fact that Allstate had not yet resolved the Homeowners' fire loss claim. In GGG's view, the proper

course of action was to seek only declaratory relief. The next day, the Homeowners filed a written objection to GGG's request to proceed only with the declaratory judgment claim.3 The Homeowners stated that they did not

object to GGG's nonsuit of the breach of contract and quantum meruit claims but argued that, without those claims, declaratory relief was not appropriate. On the day

of the scheduled trial, the Homeowners also filed a motion for summary judgment on the declaratory judgment claim.

The Homeowners first raised the issue regarding the appropriateness of declaratory relief in a demurrer to GGG's motion for judgment. They asserted that GGG was seeking a judgment regarding a disputed issue of fact rather than an interpretation of a defined right. 4

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They again asserted that the "declaratory judgment action was appropriate only because it was pursued in conjunction with the substantive counts against the [Homeowners]." Since those claims had been nonsuited, the Homeowners argued that declaratory relief did not lie because GGG was using that procedure to avoid its burden of proof on the nonsuited claims. Thus, the Homeowners asked the circuit

court to dismiss the declaratory judgment claim, or alternatively, grant summary judgment in their favor. After hearing argument on the Homeowners' motion, the circuit court took the matter under advisement and proceeded with a jury trial on the declaratory judgment claim. The court eventually denied the motion for summary

judgment during the trial. At the close of the evidence, the circuit court submitted one factual issue to the jury in an interrogatory: "Do you find that Goodman, Gable, [&] Gould Company rendered substantial performance to the Defendants Joyce Green and John Gural under their November 5, 2001 contract with them prior to the March 22, 2002 letter requesting Goodman, Gable[,] & Gould Company to withdraw from the claim?" interrogatory. The jury answered "Yes" to this

The circuit court subsequently entered a 5

final order granting declaratory relief to GGG and ruling that GGG has an "irrevocable interest" in the insurance proceeds attributable to the Homeowners' claim for the fire loss, that the amount of its interest is ten percent of "the gross amount paid or to be paid by Allstate . . . under the . . . policy of insurance," that the assignment in favor of GGG was valid and enforceable, and that Allstate shall pay directly to GGG all sums that are due or may become due to GGG from the Homeowners' claim. awarded the Homeowners this appeal. ISSUES AND ANALYSIS The sole issue is whether the circuit court abused its discretion in allowing this case to proceed as a declaratory judgment action after GGG nonsuited its other claims. Resolution of this issue requires an analysis of We

the proper function of a declaratory judgment. The purpose of declaratory judgments, which are "creatures of statutes," see Code

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