PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

FREDERICK H. QUARLES,
Plaintiff-Appellant,

v.
                                                                  No. 95-1929
HUGH O. MILLER; LAWRENCE W.
BURKS,
Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Virginia, at Charlottesville.
James H. Michael, Jr., Senior District Judge.
(CA-95-21-C, BK-95-6-A)

Argued: April 5, 1996

Decided: June 10, 1996

Before RUSSELL and MOTZ, Circuit Judges, and LAY,
Senior Circuit Judge of the United States Court of Appeals
for the Eighth Circuit, sitting by designation.

_________________________________________________________________

Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge Russell and Senior Judge Lay joined.

_________________________________________________________________

COUNSEL

ARGUED: Roy David Bradley, Madison, Virginia, for Appellant.
Francis McQuaid Lawrence, ST. JOHN, BOWLING & LAW-
RENCE, Charlottesville, Virginia, for Appellees.

_________________________________________________________________
OPINION

DIANA GRIBBON MOTZ, Circuit Judge:

The sole issue presented in this appeal is whether a final state court
judgment obtained by a foreign corporation is void and thus subject
to collateral attack because the corporation transacted business in Vir-
ginia without the certificate of authority required by state law. The
bankruptcy court found, and the district court upheld the finding, that
the final state court judgment was not for this reason subject to collat-
eral attack as void. We affirm.

I.

In 1986, Hugh O. Miller, as vice president of Colonial Electric
Company, executed a contract in Charlottesville, Virginia with Fred-
erick H. Quarles, in his capacity as vice president of Commonwealth
Capital Corporation. Commonwealth agreed to arrange financing for
Colonial's real estate project in Hilton Head, South Carolina, and paid
Quarles $65,000 in connection with the project. Colonial is a South
Carolina corporation, which has never obtained a certificate of author-
ity to transact business in Virginia.

When Commonwealth failed to fulfill Colonial's expectations, Mil-
ler and Lawrence H. Burks (hereafter appellees), individually and as
assignees of Colonial, filed suit against Commonwealth and Quarles
in Charlottesville Circuit Court. The appellees obtained a judgment
against Commonwealth but not against Quarles personally. All parties
appealed. The Virginia Supreme Court held that in addition to Com-
monwealth's liability, Quarles was personally liable to the appellees.
See Miller v. Quarles, 410 S.E.2d 639 (Va. 1991).

For this reason, appellees, as judgment creditors, then filed suit
against Quarles in the Charlottesville Circuit Court, asserting that he
had fraudulently conveyed four properties in an effort to frustrate col-
lection of their judgment. On January 7, 1994, the state court held that
Quarles had fraudulently conveyed the properties and entered an
order directing the sale of those properties. During the next two
months, Quarles filed three separate lawsuits against the appellees, all

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relating to the Hilton Head project, and the third requesting an injunc-
tion against the sale of these properties.

In October, 1994, when no relief was forthcoming from the state
court, Quarles filed a Chapter 11 bankruptcy petition. The bankruptcy
court lifted the automatic stay to allow the parties to complete their
litigation in state court and to permit Quarles' properties to be sold
pursuant to the January 7, 1994 Charlottesville Circuit Court order.
On January 2, 1995, Quarles amended his state court pleadings to
claim that the judgment against him was void because Colonial never
obtained a certificate of authority to transact business in Virginia.
This argument had never been previously asserted. On January 18,
1995, the state court denied Quarles' request to enjoin the scheduled
sale of his properties.

Quarles filed an adversary proceeding in the bankruptcy court to
contest the validity of the appellees' judgment. In a well reasoned
opinion, the bankruptcy court (Anderson, J.) granted appellees sum-
mary judgment, holding that the state court judgment is not subject
to collateral attack as void, and so refusing to invalidate the lien and
block the confirmation of the foreclosure of Quarles' real property. In
an equally careful opinion, Judge James H. Michael, Jr. affirmed that
decision and dismissed the appeal.*

II.

Quarles seeks to lodge a collateral attack on a final state court judg-
ment. It is well established that "[i]n the absence of fraud, accident
or surprise, a judgment, when entered and no appeal taken, is conclu-
sive, even though the judgment is manifestly wrong in law or fact."
Carpenter v. Ingram, 146 S.E. 193, 195 (Va. 1929). "A void judg-
ment is one that has been procured by extrinsic or collateral fraud, or
entered by a court that did not have jurisdiction over the subject mat-
ter or the parties." Rook v. Rook, 353 S.E.2d 756, 758 (Va. 1987)
(citations omitted).
_________________________________________________________________

*The above statement of the facts is largely based on Judge Michael's
opinion.

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Although Quarles does not allege fraud, or contest the state court's
jurisdiction over the parties or the subject matter, he still maintains
that the state court judgment is unenforceable. Quarles asserts that
appellees obtained their judgment against him in violation of a Vir-
ginia statute, Virginia Code § 13.1-758, which provides that a foreign
corporation doing business in Virginia may not maintain an action in
a Virginia court until it has obtained a certificate of authority. See Va.
Code Ann. § 13.1 758 (Michie 1993). This statute, he claims, makes
the state court judgment "not simply voidable, but absolutely void,
since it was obtained in violation of Virginia State law." Brief of
Appellants at 3.

Section 13.1-758 provides in pertinent part:

          § 13.1-758. Consequences of transacting business without
          authority.

          A. A foreign corporation transacting business in this Com-
          monwealth without a certificate of authority may not main-
          tain a proceeding in any court in this Commonwealth until
          it obtains a certificate of authority.

          B. The successor to a foreign corporation that transacted
          business without a certificate of authority and the assignee
          of a cause of action arising out of that business may not
          maintain a proceeding based on that cause of action in any
          court in this Commonwealth until the foreign corporation or
          its successor obtains a certificate of authority.

          C. A court may stay a proceeding commenced by a foreign
          corporation, its successor, or assignee until it determines
          whether the foreign corporation or its successor requires a
          certificate of authority. If it so determines, the court shall
          further stay the proceeding until the foreign corporation or
          its successor obtains the certificate.

...

          E. Notwithstanding subsections A and B of this section,
          the failure of a foreign corporation to obtain a certificate of

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          authority does not impair the validity of its corporate acts or
          prevent it from defending any proceeding in this Common-
          wealth.

Thus, although § 13.1-758 provides that a court may stay ongoing
proceedings to determine if a foreign corporation has obtained the
required certificate, the statute does not suggest that a final judgment
that is obtained by a foreign corporation transacting business without
a certificate can be enjoined on this basis.

Nevertheless, Quarles maintains that Colonial's failure to comply
with § 13.1-758 was an illegal act, which renders the judgment
against him void. His sole authority for this position is Moore v.
Northern Homes of Pa., 80 F.R.D. 278 (W.D. Va. 1978). In Moore,
the plaintiff moved to dismiss a counterclaim filed by the defendant
foreign corporation, because the corporation had not obtained a certif-
icate of authority. The plaintiff's motion relied on Virginia Code
§ 13.1-119 (repealed 1986), a predecessor to§13.1-758. The corpora-
tion maintained the plaintiff had waived the right to make this motion
because it had failed to do so in the time required by the Fed. R. Civ.
P. 12(h). Because Moore was a diversity case, the district court
looked to state law to determine if the motion to dismiss was timely.
See Woods v. Interstate Realty Co., 337 U.S. 535 (1949); Rock-Ola
Mfg. Corp., 249 F.2d 813 (4th Cir. 1957). After examining Virginia
law, the district court concluded that the motion was timely; that the
plaintiff's reliance upon § 13.1-119 was a defense that could be raised
at any time during ongoing litigation without being waived. Id. at 282.

In reaching this conclusion, the Moore court relied on two Virginia
cases. In the first, Video Eng'g Co. v. Foto-Video Elecs., Inc., 154
S.E.2d 7 (Va. 1967), the trial court had dismissed an action because
the plaintiff did not obtain a certificate of authority until after the ini-
tiation of its lawsuit. The Virginia Supreme Court reversed, explain-
ing "[w]hen plaintiff obtained a certificate of authority to engage in
business in Virginia after instituting this action, the barrier set out in
Code § 13.1-119 was removed and plaintiff was afforded access to the
court below to continue its action against the defendant." Id. at 9-10.
The second case upon which the Moore court relied, Phlegar v. Vir-
ginia Foods, Inc., 51 S.E.2d 227 (Va. 1949) held a plaintiff's failure

                     5
to comply with a similar statute requiring a certificate of authority to
do business under an assumed name:

          . . . does not render the cause of action illegal. It is not the
          right to begin the action, but the right to maintain it, that is
          withheld for failure to comply with its terms. It takes no
          right away from the offending party after compliance. When
          its terms are met, the barriers theretofore existing are
          removed.

Id. at 229-30.

After quoting these cases, the Moore court made the following
statement, upon which Quarles heavily relies:

          It is clear from the language of the decisions quoted above
          that the prohibition of non-complying corporations main-
          taining lawsuits in Virginia courts is not so much a defense
          available to a litigant's adversaries, and therefore plausibly
          waivable, but is rather an absolute bar to the offender's use
          of the courts to press its claim until compliance with the
          statute is effected.

Moore, 80 F.R.D. at 282. Based upon this conclusion, the Moore
court ruled that the plaintiff's motion to dismiss did not come too late.
Id. The court did not dismiss the case, however; instead, it gave the
defendant thirty days to obtain the necessary certificate of authority.
Id.

The holding in Moore -- permitting a party to force a corporation
to comply with the certificate of authority requirement before allow-
ing the corporation to proceed with ongoing litigation -- is entirely
consistent with § 13.1-119 (and § 13.1-758) and the relevant Virginia
case law. However, there is no support in the statute or case law for
the theory that Quarles espouses, based on Moore dicta. Relying on
the Moore court's statement that the statute is an "absolute bar to the
offender's use of the courts," 80 F.R.D. at 282, Quarles argues that
failure to comply with the statute must make a final judgment
obtained by an "offender" void, even though the opposing party never

                     6
raised this objection prior to judgment. The statute itself does not so
provide and while the Virginia Supreme Court has held that a party
can be required to obtain a certificate prior to proceeding in ongoing
litigation, Video Eng'g, 154 S.E.2d at 9-10; Phlegar, 51 S.E.2d at
230, it has never held that this can be a basis for disregarding a final
judgment. Indeed, in Phlegar the court clearly indicated to the con-
trary, noting that failure to comply with a certificate of authority stat-
ute "does not render the cause of action illegal." 51 S.E.2d at 229-30.

The critical distinction between Video Eng'g, Phlegar, and Moore,
on one hand, and the instant case, on the other, is the entry of a final
judgment. In Video Eng'g, Phlegar, and Moore the litigants raised the
failure to comply with the certificate of authority statute before the
trial court entered judgment; Quarles never raised this defense until
after the state court had entered a final judgment. As Judge Michael
explained:

          Those cases dealt with the timing of when the defense could
          be raised before judgment, and none of them anticipated a
          collateral attack upon a previously entered judgment. Those
          cases, while relevant, do not control the outcome of the
          instant case. They do not create an exception to Virginia's
          rule regulating when final judgments are subject to collateral
          attack. The Appellant had a chance to raise § 13.1-758 with
          the trial court or on appeal with the Virginia Supreme Court,
          and he failed to do so. Absent fraud or lack of jurisdiction,
          he simply may not attack the judgment collaterally.

(emphasis in original).

This conclusion is in accord with authority throughout the country.
See, e.g., 18 WILLIAM M. FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW
OF PRIVATE CORPORATIONS § 8628 (perm. ed. rev. vol. 1991 & Supp.
1994), and cases cited therein; HARRY G. HENN & JOHN R. ALEXANDER,
LAWS OF CORPORATIONS § 101 at p. 233 (3d ed. 1983) ("The Corpora-
tion's disability to sue must be promptly asserted to avoid waiver of
the defense"), and cases cited therein; see also Wetzel & T. Ry. Co.
v. Tennis Bros. Co., 145 F. 458, 463 (4th Cir. 1906) (when interpret-
ing a similar West Virginia statute, we opined that it did not "operate
to end a suit otherwise regularly instituted or to destroy a right in

                     7
other respects validly existing; instead, since the party objecting to the
out of state corporation's failure to qualify waited until after trial on
the merits "it was too late . . . to avail itself of such a defense.");
United States Trust Co. v. DiGhello, 425 A.2d 1287, 1288 (Conn.
1979) (Defendant attempted to reopen a judgment of foreclosure
based on a similar statute. The court denied his claim, stating that
"[s]uch a claim is but a voidable defect, waived, if not presented by
a defendant in a timely manner") (citation omitted).

Moreover, in Wackwitz v. Roy, 418 S.E.2d 861, 863-64 (Va. 1992),
the Virginia Supreme Court recently held that a similar statute, which
bars nonresident administrators from maintaining wrongful death
actions, is not jurisdictional and so this defect may not be raised for
the first time on appeal. Phlegar makes it clear that a corporation's
failure to qualify as required by § 13.1-758 is similarly not jurisdic-
tional. See 51 S.E.2d at 229-30. See also 4B MICHIE'S JURISPRUDENCE
OF VIRGINIA AND WEST VIRGINIA, Corporations § 290 at p.619 (1986).

A court having jurisdiction over the parties and subject matter
issued a valid, final judgment in the appellees' favor against Quarles.
He cannot, years after the fact, assert that this judgment is void
because of the failure of his adversaries to comply with a certificate
of authority statute.

III.

For these reasons, the order of the district court is

AFFIRMED.

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