Title: Welding Inc. v. Bland County Service Auth.

State: virginia

Issuer: Virginia Supreme Court

Document:

Present:  Carrico, C.J., Lacy, Keenan, Koontz, and Lemons, JJ. 
 
WELDING, INC. 
 
v.  Record No. 000836     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
March 2, 2001 
BLAND COUNTY SERVICE AUTHORITY 
 
FROM THE CIRCUIT COURT OF BLAND COUNTY 
J. Colin Campbell, Judge 
 
 
Welding, Inc. (Welding), a construction company, sued the 
Bland County Service Authority (the Authority), for payments 
allegedly due pursuant to a contract between the parties.  In 
this appeal, Welding seeks reversal of the trial court's 
judgment dismissing the action, asserting that the tolling 
provision of Code § 8.01-229(E)(1) applies to actions filed in 
a federal court located outside the Commonwealth and that the 
allegations in its proposed amended motion for judgment were 
sufficient to withstand a demurrer because they reflected 
compliance with certain statutory and contractual provisions 
required for recovery. 
In 1995, the Authority1 awarded a $981,000 contract to 
Welding for the construction of a piping system through the 
East River Mountain Tunnel located on Interstate Highway 77 at 
the Virginia-West Virginia border.  The contract required the 
use of a specific type of plastic piping system.  At a meeting 
in 1996, Welding told the Authority that the plastic piping 
was unsuitable because of the vibration from the automobile 
traffic in the tunnel.  The Authority acknowledged Welding's 
concerns but decided to proceed using the plastic piping.  The 
piping failed repeatedly during testing, necessitating repairs 
and delays. 
 
Following completion of the work, Welding sought payment 
of the full contract price and approved change orders.  On 
February 13, 1998, the Authority responded, notifying Welding 
that it attributed the delay in completion to Welding and was 
withholding $166,000 of the contract price, which represented 
liquidated damages for the delay.  The Authority also denied 
Welding's claim for an additional $100,000 in extra work that 
Welding claimed was required to fix the leaks in the piping 
system. 
 
On April 29, 1998, Welding filed suit against the 
Authority in the United States District Court for the Southern 
District of West Virginia.  The federal court determined that 
it did not have jurisdiction to entertain the litigation 
because of a forum selection clause in the contract and 
dismissed the suit without prejudice on November 17, 1998. 
Welding filed the instant action in the Circuit Court of Bland 
County on January 8, 1999.  The Authority filed a plea in bar 
                                                                
1 At the time of the contract, the Authority was named the 
Bland County Water Authority. 
 
2
and a demurrer asserting that Welding failed to comply with 
§ 11-69 of the Virginia Public Procurement Act, Code §§ 11-35 
to -80 (the Procurement Act), because Welding did not give 
notice of its intent to file a claim as required by subsection 
A and did not institute legal action within the time 
prescribed in subsection D of Code § 11-69. 
The trial court granted the Authority's demurrer and plea 
in bar.  As to the plea in bar, the trial court found that 
filing a suit in an "improper venue" or a forum "outside the 
jurisdiction of the Commonwealth" does not invoke the tolling 
provision of Code § 8.01-229(E)(1) and, therefore, the instant 
litigation was not filed within six months of the final 
decision of the Authority as required in Code § 11-69(D).  In 
sustaining the Authority's demurrer, the trial court held that 
the claims were barred as a matter of law because Welding 
failed to comply "with the contractual conditions precedent to 
ascertain any claim" and with the "requisite statutory 
conditions precedent to asserting any claims in this court."  
Specifically, the trial court found that "[n]owhere in the 
pleadings does it appear that the contractor ever gave 
'written notice of its intention to file' [a] claim" as 
required by Code § 11-69(A).  The trial court denied Welding's 
motion to reconsider and motion for leave to file an amended 
motion for judgment and dismissed the motion for judgment. 
 
3
On appeal, Welding raises a number of assignments of 
error which generally challenge the trial court's construction 
and application of the tolling provision of Code § 8.01-
229(E)(1) and the denial of Welding's motion to file an 
amended motion for judgment. 
I.  Plea in Bar 
We first address whether the trial court correctly 
determined that the tolling provision of Code § 8.01-229(E)(1) 
does not apply to actions filed in federal courts.  The trial 
court's decision was based on its comparison of subsections 
(E)(1) and (E)(3) of Code § 8.01-229.  Those subsections 
provide respectively: 
1. Except as provided in subdivision 3 of this 
subsection, if any action is commenced within the 
prescribed limitation period and for any cause 
abates or is dismissed without determining the 
merits, the time such action is pending shall not 
be computed as part of the period within which 
such action may be brought, and another action 
may be brought within the remaining period. 
 
. . . . 
 
3. If a plaintiff suffers a voluntary nonsuit as 
prescribed in § 8.01-380, the statute of 
limitations with respect to such action shall be 
tolled by the commencement of the nonsuited 
action, and the plaintiff may recommence his 
action within six months from the date of the 
order entered by the court . . . . This tolling 
provision shall apply irrespective of whether the 
action is originally filed in a federal or a 
state court and recommenced in any other court 
. . . . 
 
 
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The trial court reasoned that because the General Assembly 
specifically made the tolling provision of subsection (E)(3) 
applicable to suits filed in federal court, but did not 
specifically include suits filed in federal courts in 
subsection (E)(1), the tolling provision of subsection (E)(1) 
was not applicable to suits in federal courts.  We conclude 
that the trial court's construction of subsection (E)(1) was 
erroneous for the following reasons. 
 
Subsection (E)(3) addresses a very specific circumstance 
in which an action is abated or dismissed without determining 
the merits — the use of a voluntary nonsuit.  The term 
"nonsuit" identifies a specific practice used in Virginia 
civil procedure.  Federal court practice does not include a 
procedure labeled a "nonsuit," but does recognize procedures 
which are substantially equivalent to Virginia's nonsuit.  See 
Fed. R. Civ. P. 41.  In order to provide consistent treatment 
for the federal procedural equivalent of the Virginia nonsuit, 
specific reference to actions in federal courts in subsection 
(E)(3) of Code § 8.01-229 was required. 
However, unlike the circumstances compelling the 
reference to federal courts in subsection (E)(3), no reference 
to federal courts was needed to allow the tolling provision of 
subsection (E)(1) to apply to suits filed in those courts.  
Subsection (E)(1) applies a tolling period to "any action" 
 
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which abates or is dismissed without determining the merits.  
The term "action" refers to civil litigation in both the state 
and federal courts.2  See Fed. R. Civ. P. 2 ("There shall be 
one form of action to be known as 'civil action.' ")  There is 
no language in Code § 8.01-229(E)(1) which limits or restricts 
its application to a specific type of action or precludes its 
applicability to actions filed in a federal court.  
Accordingly, we conclude that the trial court erred in 
construing Code § 8.01-229(E)(1) as inapplicable to actions 
filed in federal courts. 
The Authority asserts alternative arguments in support of 
the trial court's holding.  The Authority argues that applying 
the tolling provision of Code § 8.01-229(E)(1) would "Ignore 
And Invalidate The More Specific, And Jurisdictional" time 
limit and forum requirements of Code §§ 11-69(D) and –70(E) 
and that the tolling provision cannot affect Code § 11-69(D) 
because that statute is a statute of repose.  These arguments 
are not persuasive. 
                     
2 Although the Authority argued in the trial court that 
the definition of "action" contained in Code § 8.01-2 
restricts the subdivision's application to actions filed in 
circuit court, that argument was not advanced on appeal and is 
not persuasive.  That Code section defines an "action" as 
including actions brought "in circuit courts or district 
courts."  Thus, the term "action" is not limited to matters 
filed in circuit courts or general district courts.  
Furthermore, the purpose of the definition is to include 
proceedings both at law and in equity. 
 
6
 
The Authority asserts that the provisions of the 
Procurement Act relating to filing suit within six months of 
the agency's final decision in "the appropriate circuit court" 
are statutes of specific application and take precedence over 
the more general tolling statute.  The principle upon which 
the Authority relies applies when two statutes address the 
same subject matter and are in conflict.  Here, however, there 
is no conflict because neither section of the Procurement Act 
addresses the tolling of actions, which is the subject of Code 
§ 8.01-229(E)(1).  Cf. Dodson v. Potomac Mack Sales & Serv., 
Inc., 241 Va. 89, 94-95, 400 S.E.2d 178, 181 (1991)(Code 
§ 8.01-229(E)(3) deals generally with tolling statutes of 
limitations, whereas Code § 8.01-244(B) deals specifically 
with tolling of wrongful death actions and prevails over 
general statute).  Because the provisions of the Procurement 
Act and the tolling statute address separate matters, the 
Procurement Act provisions relied upon here are not specific 
statutes which take precedence over the general tolling 
provision of Code § 8.01-229(E)(1). 
The Authority next asserts that the two provisions at 
issue are "jurisdictional" and would be rendered meaningless 
if an action seeking relief under the Procurement Act could be 
prosecuted beyond the six month appeal time after having been 
filed in the wrong court.  For purposes of this discussion, we 
 
7
will assume without deciding that the General Assembly 
intended the phrase "bring an action . . . in the appropriate 
circuit court" to limit actions against it under the 
Procurement Act to the circuit courts of this Commonwealth. 
Nevertheless, the term "jurisdictional" has many 
applications and the Authority does not explain precisely the 
meaning it ascribes to the term in this context.  These 
provisions, however, do not implicate subject matter 
jurisdiction and, thus, are not mandatory jurisdictional 
requirements.  See Morrison v. Bestler, 239 Va. 166, 169-70, 
387 S.E.2d 753, 755-56 (1990).  Rather, they are mandatory 
procedural requirements; that is, conditions that must exist 
in order for a court to resolve an action on its merits.  The 
failure to comply with these requirements renders an order 
voidable, not void.  Id.
The six month appeal period, like all limitations 
periods, ensures that defendants do not suffer a disadvantage 
caused by the passage of time making defense of a case more 
difficult.  Applying the tolling provision here does not give 
rise to that disadvantage because, regardless of where an 
action is filed, it must be filed within the six month period 
for the tolling provision to be triggered.  Furthermore, any 
error stemming from the failure to file the action "in the 
appropriate circuit court" does not prejudice the defendant, 
 
8
because, as in this case, the original court cannot proceed to 
resolve the case on the merits.  We conclude that applying the 
tolling provision of Code § 8.01-229(E)(1) is not precluded by 
the language of the Procurement Act, does not defeat any 
legislative purpose to impose an appeal period or forum 
requirement, and does not render the limitations and venue 
provisions of Code §§ 11-69(D) and –70(E) meaningless. 
Finally, we reject the Authority's argument that the 
appeal provision, Code § 11-69(D), is a statute of repose 
which cannot be subjected to a tolling provision.  At the 
onset, the Authority admits that it has no legal support for 
the proposition that tolling provisions do not apply to 
statutes of repose.  And, although the Authority correctly 
recites the proposition that a statute of repose is one that 
is based on the expiration of a specific time period, 
unrelated to when a cause of action accrues, Sch. Bd. of 
Norfolk v. United States Gypsum Co., 234 Va. 32, 37, 360 
S.E.2d 325, 327-28 (1987), the six month period set out in 
Code § 11-69(D) is triggered by the accrual of the cause of 
action, that is, the point in time when the agency denies the 
claim.  Thus, Code § 11-69(D) operates in this regard as a 
statute of limitations, not a statute of repose. 
Having concluded that the tolling provision of Code 
§ 8.01-229(E)(1) is applicable to this action, we will reverse 
 
9
the judgment of the trial court sustaining the Authority's 
plea in bar. 
II.  Demurrer 
We now turn to Welding's assignments of error relating to 
the failure of the trial court to allow it to file an amended 
motion for judgment.  In its June 21, 1999 letter opinion 
sustaining the Authority's first demurrer, the trial court 
concluded that the motion for judgment did not indicate that 
Welding had filed a notice of intent to file a claim as 
required by Code § 11-69(A) nor that Welding had complied 
with the "contractual conditions precedent."  After 
consideration of Welding's motion to amend and a proposed 
amended motion for judgment, the trial court entered an order 
concluding that the proposed amended motion for judgment 
"would not cure the deficiencies upon which the Court's 
decision is based."  Although Welding does not challenge the 
trial court's action in granting the Authority's first 
demurrer, because of the posture of this case, we must 
consider the reasons given for granting the first demurrer in 
light of the amended motion for judgment. 
The principles we apply are familiar.  A demurrer tests 
the legal sufficiency of a pleading and can be sustained if 
the pleading, considered in the light most favorable to the 
plaintiff, fails to state a valid cause of action.  W.S. 
 
10
Carnes, Inc. v. Bd. of Supervisors, 252 Va. 377, 384, 478 
S.E.2d 295, 300 (1996).  We consider as admitted the facts 
expressly alleged and those which fairly can be viewed as 
impliedly alleged or reasonably inferred from the facts 
alleged.  Id.
There are two claims in this case:  a claim for $166,000, 
representing the amount withheld as liquidated damages for 
delay the Authority attributed to Welding; and a claim for 
$100,000 for additional expenses Welding asserts were 
incurred as extra work to repair leaks to the piping system 
caused by the Authority's decision to use plastic piping.  In 
considering whether the amended motion for judgment could 
"cure the deficiencies" found in the original motion for 
judgment, we apply the foregoing principles to both the 
statutory and contractual requirements for each claim. 
A.  Statutory Requirements 
Code § 11-69(A) requires that claims be submitted in 
writing "no later than sixty days after final payment" and 
that a written notice of intent to file a claim be submitted 
"at the time of the occurrence or beginning of the work upon 
which the claim is based."  With regard to the $100,000 claim 
for the additional work, the amended motion for judgment 
states that "final payment" was made on February 13, 1998; 
that by letter dated March 3, 1998, "Welding made [a] claim 
 
11
for $100,000" for the additional work; and that the Authority 
"previously had written notice of Welding's intention to file 
[the claim for $100,000 in additional costs] at the time of 
the occurrence or beginning of the work upon which the claim 
was based." 
The Authority asserts that these allegations are 
insufficient to show a written intent to file a claim because 
it is based on the written minutes of a progress meeting.  
According to the Authority, the Procurement Act "envisions 
written notice by the claimant," but these minutes were 
reduced to writing by the Authority's architect.3  The 
Authority's argument is not sufficient to warrant sustaining 
the demurrer on this point. 
The amended motion for judgment in this case states only 
that the Authority had previous written notice of Welding's 
intention to file a claim.  While reciting portions of the 
written minutes of a progress meeting, the pleading does not 
claim that these minutes constituted the previous written 
notice of the intent to file a claim for the additional work.  
Furthermore, even assuming the written minutes are the 
                     
3 A number of exhibits were attached to the amended motion 
for judgment, including the contract between Welding and the 
Authority, minutes of meetings, and various correspondence. 
These documents are properly considered in determining whether 
a valid cause of action has been pled.  Flippo v. F&L Land 
Co., 241 Va. 15, 17, 400 S.E.2d 156, 156 (1991). 
 
12
previous written notice pled by Welding, whether such writing 
complies with the requirements of Code § 11-69(A) is a 
determination to be made at trial.  A demurrer does not test 
matters of proof and, unlike a motion for summary judgment, 
does not involve evaluating and deciding the merits of a 
claim; it tests only the sufficiency of factual allegations to 
determine whether the pleading states a cause of action.  
Riverview Farm Assocs. v. Bd. of Supervisors, 259 Va. 419, 
427, 528 S.E.2d 99, 103 (2000); Concerned Taxpayers v. County 
of Brunswick, 249 Va. 320, 327-28, 455 S.E.2d 712, 716 (1995); 
Fun v. Va. Military Inst., 245 Va. 249, 252, 427 S.E.2d 181, 
183 (1993). 
With regard to Welding's claim for $166,000 in withheld 
liquidated delay damages, the amended motion for judgment  
states that on February 13, 1998 the Authority withheld the 
$166,000 and that in a letter dated March 3, 1998 Welding 
"objected to [the Authority's] decision to withhold 
liquidated damages for delay" and "made a written claim for 
the balance due."  Welding asserts that these allegations are 
sufficient to show compliance with the requirements of Code 
§ 11-69(A) because the "occurrence" of the claim arose at the 
time the Authority made the determination to withhold the sum 
of $166,000 in liquidated delay damages. 
 
13
The Authority asserts that these allegations are 
insufficient because the attachments to the pleadings show 
that disputes regarding responsibility for the delay and 
extra work arose in October 1996 and that Welding "was aware 
of" the disputes and "its intention to file claims" prior to 
the actual withholding of the liquidated damages.  Even if 
the "occurrence" of the claim was at the time liquidated 
damages were withheld, the Authority continues, the March 3 
letter was not proper notice because it was not given on 
February 13, "at the time of the occurrence." 
Once again, however, the issues raised by the Authority 
require construing the provisions of the Procurement Act and 
applying them to the facts of this case.  Issues such as 
whether filing notice eighteen days after an alleged 
"occurrence" or filing a notice of intent and a claim in a 
single document comply with the Procurement Act are not 
matters of pleading a cause of action, but of resolving the 
merits of the cause.  See Flory v. Commonwealth, 261 Va. ___, 
___ S.E.2d ___ (2001), decided today. 
We conclude that the allegations of the amended motion 
for judgment and all inferences reasonably taken therefrom 
"cure the deficiencies" found by the trial court in the 
original motion for judgment regarding the requirements of 
the Procurement Act because they sufficiently allege written 
 
14
notice of Welding's intention to file a claim for the 
withheld liquidated damages and the additional work as 
required by Code § 11-69(A). 
B.  Contractual Provisions 
The trial court also held that the amended motion for 
judgment did not "cure the deficiencies" of the original 
pleading regarding compliance with the "contractual 
conditions precedent" to making a claim.  Nothing in the 
trial court's orders or letter opinions directly addresses 
the contractual provisions in issue or the specific 
deficiencies of the pleading.  However, the Authority argues 
that these deficiencies include failure to allege compliance 
with contract provisions requiring written notice for an 
exemption from delay damages and written change orders for 
additional work. 
Welding asserts that for the purposes of a demurrer, the 
amended motion for judgment sufficiently states a cause of 
action for breach of contract because it alleges that the 
Authority was given notice of the delay through the progress 
meetings and the minutes of those meetings and that the 
parties agreed that the extra repair work should be undertaken 
and "liability for delay and additional compensation for 
repairs would be resolved after the work was done."  This 
 
15
agreement, the amended pleading asserts, was "in accordance 
with paragraph 30A of the Supplementary General Conditions." 
We conclude that these allegations sufficiently plead 
compliance with the "conditions precedent" to making a claim 
under the contract between the Authority and Welding.  Like 
the dispute involving compliance with the notice provisions of 
Code § 11-69(A), the dispute here involves interpretation of 
the various contract provisions and application of the 
construed contract to the facts of this case.  That is a 
matter for trial.  As we have said, resolution of such issues 
is not appropriate for determination on demurrer and the trial 
court erred in denying Welding's motion to file its proposed 
amended motion for judgment. 
Accordingly, for the above reasons, we will reverse the 
judgment of the trial court and remand the case for further 
proceedings consistent with this opinion. 
Reversed and remanded. 
 
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