by Robert K. Cox, Senior Partner

There have been several recent noteworthy decisions from federal and state courts addressing issues of Virginia construction law.  Six of those case rulings are summarized here for you.

No Mechanic’s Lien For Preparatory Labor and Materials

In Dallan Construction, Inc. v. Super Structures General Contractors, Inc., (Cir. Ct. Hanover County Jan. 30, 2009), the Circuit Court of Hanover County invalidated Super Structures’ mechanic’s lien for labor and material costs incurred in anticipation of commencing a steel building project for Dallan Construction.  Prior to commencement of the construction on site, Dallan had cancelled its agreement with Super Structures and thereafter built the building project with another contractor.  Before the cancellation, however, Super Structures had incurred costs to fabricate steel components for the planned building, as well as labor costs in planning the erection sequence.

The Circuit Court found that none of Super Structures’ fabricated steel was incorporated in the liened property or that the steel ever even reached the building site.  Likewise, the Court found that Super Structures’ building planning or architectural work, primarily in preparation for erection of the building, was never used for the building construction.  Therefore, neither could be the basis of a mechanic’s lien.  Importantly, the Court did acknowledge that Virginia’s mechanic lien statute contemplated architectural labor costs as a basis for a lien, but the architectural labor must have specifically enhanced the property to be liened.  In this case, however, Super Structures’ contract alone failed to provide the necessary nexus between Super Structures’ labor and materials and the property for purposes of asserting a mechanic’s lien to recover Super Structures’ incurred costs.

No Correcting of Mechanic’s Lien When Amount Overstated

In Smith Building Supply, LLC v. Windstar Properties, LLC, 2009 WL 485020 (Va. 2009), the building supply company included sums in its two liens for materials furnished to two projects more than 150 days prior to the last day on which materials were supplied respectively to the jobs.  When the property owner sought dismissal of the liens for including amounts outside the statutory 150 day “count-back” period, the building supply company argued that while the inclusion of such sums was an inaccuracy in the memorandum of lien, the inaccuracy could not be a basis to invalidate the liens when the building supplier had, otherwise, substantially complied with the mechanic’s lien statute.  The building materials supplier based its argument on Code § 43-15 which provides, in part:

No inaccuracy in the memorandum filed, or in the description of the property to be covered by the lien, shall invalidate the lien, if the property can be reasonably identified by the description given and the memorandum conforms substantially to the requirements of §§ 43-5, 43-8 and 43-10, respectively, and is not willfully false.

The Supreme Court of Virginia rejected the material supplier’s argument, and ruled the liens unenforceable and invalid.  The Court reasoned that the 150 day “count-back” limit on amounts included in the lien to be a statutory prerequisite to perfect a mechanic’s lien, and Code § 43-15 had no application.

Enforcement of Forum Selection Clauses

In Rice Contracting Corporation v. Callas Contractors, Inc., 2009 WL 21597 (E.D. Va.
2009), the plaintiff subcontractor sued the defendant prime contractor in federal district court for breach of their two subcontracts for school construction projects in Loudoun and Fauquier County, Virginia.

The defendant prime contractor moved to dismiss the litigation on the basis that the federal district court was not a proper venue based on the subcontracts’ forum selection clauses.  Those clauses were identical except for the specific forum county named in the respective subcontracts:

… [E]ach of the parties to this Agreement submits to the jurisdiction of any state court sitting in [Loudoun or Fauquier] County, Virginia in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court.  Subcontractor and Contractor each also agrees not to bring any action or proceeding arising out of or relating to this Agreement in any other court.

(emphasis added).  The federal court found the second sentence to be mandatory language and even though the federal court had jurisdiction over Loudoun and Fauquier Counties, the federal court obviously was not a “state court sitting” in those counties.  There were no allegations of unfairness, fraud or overreaching or violation of Virginia public policy, nor evidence of unequal bargaining power between the two parties.  The subcontractor’s argument that enforcement of the subcontracts’ respective forum selection clauses would mean two separate state actions, contrary to judicial economy and resulting in added expenses to the parties did not sway the federal court.  The federal court dismissed the litigation from the federal court on the basis of improper venue.

Subcontract’s Flow-Down Clause Provides Accrual Date For Statute of Limitations

In Steadfast Insurance Company v. Brodie Contractors, Inc., 2008 WL 4780099 (W.D. Va. 2008), the defendant subcontractor argued that Virginia’s statute of limitations barred the plaintiff’s breach of subcontract claims.  The federal district court agreed.

The federal court saw that the subcontract did not have its own statute of limitations terms.  The subcontract did, however, include a flow-down clause incorporating the prime contract’s general conditions, including terms in the prime contract determining when the statute of limitations will accrue.  Under the circumstances, the court found the flow-down terms to govern as “… a fundamental principle of construction contract law.”  Based on the accrual terms of the prime contract, incorporated by the flow-down clause into the subcontract, the statute of limitations had run and the court granted summary judgment in favor of the subcontractor.

Failure To Comply With Statute Bars Claim Against County

In Viking Enterprises, Inc. v. County of Chesterfield, 277 Va. 104, 670 S.E.2d 741 (2009), the County had denied the contractor’s monetary claim against the County arising out of a contract covered by the Virginia Public Procurement Act.  The contractor filed an appeal to circuit court within the six month period required by the Virginia Public Procurement Act.  The County argued, however, that the contractor’s failure to comply as well with Virginia Code § 15.2-1246, requiring written notice of the appeal to be served on the clerk of the County’s governing body and execution of a bond, to be grounds for dismissal of the contractor’s claim, regardless of compliance with the Public Procurement Act.  The Supreme Court of Virginia agreed with the County.

The Court reasoned that the Virginia Public Procurement Act’s procedure for appealing claims subject to the Act did not conflict with the statutory notice and bond requirements when appealing a County’s adverse decision on a monetary claim to a circuit court.  The Court held that when appealing from a County’s disallowance of a claim arising out of a contract covered by the Virginia Public Procurement Act, the claimant must serve written notice of its appeal on the clerk of the County’s governing body and execute a bond to the County within the statute’s prescribed time.  To comply with the Public Procurement Act, the claimant must also institute legal action in the appropriate circuit court within six months of the date of the decision denying the claim.  Importantly, in a footnote to its decision, the Court wrote that it did not address whether the Procurement Act’s allowance for invoking administrative procedures, if available, conflicted with the statutory notice and bond requirements.

Final Payment of Lesser Amount Found To Be An Accord and Satisfaction

In Michael L. Helton v. Phillip A. Glick Plumbing, Inc., 2009 WL 485019 (Va. 2009), an owner building his home disputed the billings of his plumber performing plumbing work in the construction of the home.  The owner sent a check payable in a lesser amount than the plumber had billed, writing on the check ¨paid in full« and transmitting the check with a letter disputing the amount billed and indicating no further payments would be made.  The plumber issued another bill for the balance in dispute, as well as cashed the owner’s check in payment of the lesser sum, crossing out the “Paid in Full” and writing on the check “No” and “Balance Due $1,686.51.”

When the plumber sued for the balance of its bill, the home owner argued the check with the lesser payment was an accord and satisfaction, and no further payment was due.  The Virginia Supreme Court agreed with the home owner.  Under Virginia Code § 8.3A-311, an amendment to the Uniform Commercial Code, the home owner was entitled to a judgment if he established 1) he tendered payment in good faith  as  full  satisfaction  of  the  claim, 2) the amount  of  the  claim  was  unliquidated,  or subject  to  a  bona  fide  dispute,  and 3)  the claimant (here the plumber) obtained payment of the instrument (the check).  The Court found the home owner to have met the statutory criteria.   As for the plumber striking through the “Paid in Full” terms on the check, the Court ruled that Virginia common law (unlike some other jurisdictions)  did  not  allow  acceptance with alteration (here the strike-out of “Paid in Full”) of an instrument tendered in good faith as a  full  payment  of  a  disputed  debt.   The Supreme Court entered judgment for the home owner against the plumber. 


The information or opinion provided in this article is the author's own and not necessarily that of Watt, Tieder, Hoffar & Fitzgerald, LLP. The author is solely responsible for the information and opinion that he or she has provided. The information contained herein does not replace seeking specific legal counsel to directly address individual client needs.

Watt, Tieder, Hoffar & Fitzgerald is one of the largest construction law firms in the world, with a practice that encompasses all aspects of construction contracting, claims and disputes resolution, and transactional legal services. WTHF principally represents large general contractors, design firms, and sureties throughout the country and internationally.