Title: Flory Small Business Dev. Ctr. v. Commonwealth
Citation: N/A
Docket Number: 000961
State: Virginia
Issuer: Virginia Supreme Court
Date: March 2, 2001

Present:  Carrico, C.J., Lacy, Keenan, Koontz, Kinser, and 
Lemons, JJ. 
 
THE DR. WILLIAM E.S. FLORY 
SMALL BUSINESS DEVELOPMENT  
CENTER, INC. 
 
v.  Record No. 000961     OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
March 2, 2001 
COMMONWEALTH OF VIRGINIA,  
DEPARTMENT OF BUSINESS  
ASSISTANCE, ET AL. 
 
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY 
Barnard F. Jennings, Judge 
 
 
In this appeal, The Dr. William E.S. Flory Small Business 
Development Center, Inc. (the Center) seeks reversal of the 
trial court's judgment denying its claim against the Virginia 
Department of Business Assistance (VDBA) for services rendered 
by the Center.  The issues we address are whether the Virginia 
Public Procurement Act, Code §§ 11-35 to -80 (the Procurement 
Act), applies to the Center's contractual claims, and, if so, 
whether the Center complied with the notice provisions of that 
Act.  We also consider whether the Commonwealth can be held 
liable for claims based on quasi-contractual theories of 
recovery. 
The United States Small Business Administration (SBA) 
administers a federal grant program to provide assistance to 
small businesses throughout the country.  The grant monies are 
distributed by the SBA to "lead agencies," which in turn 
allocate the federal funds to local small business development 
centers (SBDC) pursuant to written agreements between the SBDC 
and the lead agency.  The SBA releases the funds after 
approving the budget of a SBDC as submitted by the lead 
agency.  Federal funds provide fifty percent of the SBDC's 
budget and the SBDC must match the federal funding through 
local sponsors, private grants, donations, or other similar 
sources.  Periodically throughout the year, the SBDC submits 
invoices to the lead agency detailing its expenditures, and 
the lead agency reimburses the SBDC with the federal funds 
based on the invoices received. 
 
The lead agency for this program in Virginia is the VDBA.  
The Center is a non-stock corporation created by the Prince 
William Industrial Development Authority to operate as a SBDC 
in Prince William County.  From 1991 to 1998, the Center 
provided various services to small businesses in Prince 
William County and the surrounding area under the SBA federal 
assistance program.  The Center was reimbursed by the VDBA for 
these services pursuant to a series of Memoranda of Agreement 
executed annually by the Center and the VDBA. 
By letter dated December 18, 1998, the VDBA informed the 
Center that funding of approximately $33,000 had been 
authorized for the months of January and February 1999, but 
that "reimbursement for expenses shall not be disbursed until 
[the Center] has returned a signed copy of the Memorandum of 
 
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Agreement."  A dispute arose between the Center and the VDBA 
regarding the management of the Center.  The Center refused to 
sign the written Memorandum of Agreement for 1999 proffered by 
the VDBA until certain terms were negotiated but continued to 
provide the same services as it had in past years. 
In June 1999, the Center submitted invoices for 
reimbursement of approximately $89,000 for services rendered 
and expenses incurred from January through June 1999.  The 
VDBA refused to pay the invoices because no memorandum of 
agreement had been signed.  The Center filed suit against the 
VDBA, seeking reimbursement of its expenditures for 1999. 
In an amended motion for judgment joining the Comptroller 
as a defendant, the Center requested a total of approximately 
$210,000 plus interest, costs, and attorneys' fees.  The 
Center sought recovery based on alternative theories of 
express oral promise, quantum meruit, account stated, and 
contract implied by acceptance of services.  The VDBA filed a 
plea in bar, contending that the action was barred because the 
Center did not comply with the notice provisions of the 
Procurement Act.  The trial court sustained the VDBA's plea in 
bar and dismissed the case. 
The Center appeals the trial court decision, arguing that 
the Procurement Act does not bar its claims because (1) the 
Procurement Act applies only to services acquired from 
 
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nongovernmental sources, and the Center does not qualify as a 
nongovernmental source; (2) the Procurement Act does not apply 
to the Center's claims that are based on quasi-contract; and 
(3) even if the Procurement Act applies, the Center complied 
with the notice provisions of the Act.1  We will consider these 
assertions in order. 
I. 
 
The Procurement Act sets out the "public policies 
pertaining to governmental procurement from nongovernmental 
sources," and requires that all "public contracts with 
nongovernmental contractors . . . for the purchase of services 
. . . shall be awarded" as provided in the Act, "unless 
otherwise authorized by law."  Code §§ 11–35(B), -41(A).  The 
term "nongovernmental source" is not defined in the 
Procurement Act.  However, the Center asserts that because it 
was created by a political subdivision of the Commonwealth and 
engages in activities which are exclusively for " 'charitable 
and educational purposes including lessening the burdens of 
federal, state and local government' " by assisting small 
businesses, it performs governmental functions and, thus, is 
not a nongovernmental source.  "In effect," the Center argues, 
                     
1 The Center's claims are not based on any written 
contract.  However, because the Center does not challenge the 
applicability of the Procurement Act to oral contracts, for 
purposes of this appeal we assume without deciding that the 
Procurement Act applies to oral contracts. 
 
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it is a " 'public body' as that term is defined in § 11-37" of 
the Procurement Act. 
 
We disagree with the Center.  The Procurement Act defines 
"Public body" as an entity "created by law to exercise some 
sovereign power or to perform some governmental duty, and 
empowered by law to undertake the activities described" in the 
Procurement Act.  Code § 11-37.  The Center is not an entity 
"created by law" to "perform [a] governmental duty."  As the 
Center recites, it was formed by the Prince William Industrial 
Development Authority, the directors of the Authority 
comprised the initial board of directors of the Center, and, 
in the event of the dissolution of the Center, all remaining 
assets are to be distributed to the Authority or to political 
subdivisions that contributed funds to the Center during the 
year of dissolution.  Although that Authority was created by 
ordinance pursuant to Code § 15.2-4903(A), the role of the 
Authority in incorporating the Center does not qualify the 
Center as an entity "created by law" to "perform [a] 
governmental duty" within the Procurement Act's definition of 
"Public body." 
The Center further argues that it qualifies as an entity 
"created by law" for purposes of the Procurement Act because, 
as a corporation, it is a "creature of statute."  Adopting 
this argument would transform virtually every corporation into 
 
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a public body if the corporation engages in any activity 
touching on a governmental duty.  Such a construction of the 
definition of "Public body" is not consistent with the purpose 
of the Procurement Act and we reject it. 
II. 
 
The Center next asserts that the Procurement Act does not 
apply to its claims for relief based on theories of quasi-
contract — quantum meruit and contract implied in law, Counts 
2 and 4 respectively of the amended motion for judgment.2  
Under these theories, even though there is no contract, the 
law imposes a promise to pay for services rendered to avoid 
unjust enrichment.  Kern v. Freed Co., 224 Va. 678, 680-81, 
299 S.E.2d 363, 364-65 (1983).  To obtain relief based on 
these theories, the Center asserts that compliance with Code 
§ 2.1-223.1, not the Procurement Act, was required and that it 
complied with the requirements of that section. 
 
Code § 2.1-223.1 provides that a person "having any 
pecuniary claim against the Commonwealth upon any legal 
ground" must present the claim to the head of the agency 
responsible for the alleged claim.  If the head of the agency 
disallows the claim, Code § 8.01-192 provides that a right of 
action accrues and "the person presenting such claim may 
                     
2 The Center's claims of express oral promise and account 
stated are contract claims, not claims based on theories of 
quasi-contract. 
 
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petition an appropriate circuit court for redress."  Though we 
have not considered these statutes in the context of a claim 
based on the quasi-contractual theories pled in this case, the 
Court in Commonwealth v. Pierce, 25 Va. (4 Rand.) 432 (1826), 
addressed a similar issue. 
In Pierce, a claim was presented to the state auditor for 
payment of certain bridge tolls incurred by the militia.  When 
the auditor denied part of the claim, the claimant filed for 
relief pursuant to an 1814 general law which allowed a 
claimant to appeal the auditor's denial of a claim to the law 
or equity court in the City of Richmond and allowed "a like 
petition . . . in all other cases to any other person, who is 
entitled to demand against the Commonwealth any right in law 
or equity."  Id. at 435 (discussing Rev. Code 1814, ch. 85 
§§ 2, 6).  Finding that no statute authorized the payment of 
the claimed bridge tolls, the Court determined that the 
auditor had no authority to audit the claim or issue a warrant 
for payment and that neither the auditor nor the courts could 
provide for the payment of these expenses "upon the principles 
of a quantum meruit or quantum valeba[n]t."  Id. at 437.  The 
Court further determined that the filing of an original 
petition under the statute by one "who is entitled to demand 
against the Commonwealth any right in law or equity" required 
that such demand 
 
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be founded upon some existing law.  No such demand 
can exist against the public upon the principles 
of implied assumpsits, unless it be founded upon 
some contract authorized by law, made by a public 
agent, or upon the payment to the Commonwealth, of 
money which she was not entitled to claim. 
 
Id.
 
 
This conclusion was based on principles of sovereign 
immunity, not on the construction of specific language in the 
1814 statute.  Under the common law, sovereign immunity did 
not shield the sovereign from liability for its valid 
contracts.  Wiecking v. Allied Med. Supply Corp., 239 Va. 548, 
551-52, 391 S.E.2d 258, 260 (1990).  However, quasi-
contractual doctrines are premised on the absence of a valid 
contract.  The Commonwealth's common law liability for its 
contracts does not encompass quasi-contractual claims, and any 
relief based on such claims must be authorized through a 
statute abrogating the Commonwealth's sovereign immunity. 
The statute considered by the Court in Pierce was a 
predecessor to current Code §§ 2.1-223.1 and 8.01-192.  Like 
the earlier legislation, the current statutes contain 
procedural requirements setting out the manner in which a 
claim is presented.  Neither section establishes the 
claimant's right to lodge a claim against the sovereign or the 
sovereign's liability for such claim.  Code § 2.1-223.1, in 
referring to the presentation of a claim "upon any legal 
ground," like its predecessor, implies that the right to make 
 
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the claim is not established by that statute, but must be 
found elsewhere. 
The Center provides no statutory or case authority, and 
we can find none, for the proposition that the Commonwealth 
has waived its immunity from liability under theories of 
quasi-contract.3  Therefore, we conclude that, regardless of 
the requirements of the Procurement Act, the Center cannot 
recover against the Commonwealth on the quasi-contractual 
theories pled in Counts 2 and 4 of its amended motion for 
judgment. 
III. 
The Center next argues that even if the Procurement Act 
applies, the trial court erred in granting the VDBA's plea in 
bar because the Center complied with the requirement of Code 
§ 11-69(A) that written notice of the intent to file a claim 
be given "at the time of the occurrence or beginning of the 
                     
3 Recovery on the basis of quantum meruit has been allowed 
against a municipality exercising a proprietary function.  
Leonard v. Town of Waynesboro, 169 Va. 376, 193 S.E. 503 
(1937); Mount Jackson v. Nelson, 151 Va. 396, 145 S.E. 355 
(1928).  However, that analysis is not applicable to the 
powers and protections of the state.  See Hoggard v. City of 
Richmond, 172 Va. 145, 147-48, 200 S.E. 610, 611 (1939).   
Although Trinkle v. Commonwealth, 170 Va. 429, 438, 196 
S.E. 652, 656 (1938), did state that, in the absence of a 
definite contract due to no meeting of the minds, a contractor 
should nevertheless be entitled to compensation on the basis 
of quantum meruit for work accepted by the Commonwealth's 
Highway Department, recovery in that case was not allowed on 
the basis of quantum meruit. 
 
 
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work upon which the claim is based."  In its response to the 
VDBA's request for admissions, the Center admitted that it did 
not "specifically submit" such a notice.  The Center argues 
here, however, that it substantially complied with this notice 
requirement when it submitted its invoices.  We conclude, 
however, that, in this case, the submission of invoices did 
not qualify as compliance with the requirement in Code § 11-
69(A) that a notice of intention be filed with the 
Commonwealth. 
 
The General Assembly has imposed certain procedures and 
limitations on the processing and enforcement of contract 
claims which are subject to the Procurement Act.  These are 
mandatory, procedural requirements which must be met in order 
for a court to reach the merits of a case.4  Welding, Inc. v. 
Bland County Serv. Auth., 261 Va. ___, ___ S.E.2d ___ (2001), 
decided today.  However, the statute does not specifically 
                     
4 We recognize that in Sabre Construction Corp. v. County 
of Fairfax, 256 Va. 68, 72, 501 S.E.2d 144, 147 (1998), we 
held that a similar filing requirement of the Procurement Act, 
Code § 11-66, was a condition precedent to maintaining the 
action, and the failure to comply with the requirement barred 
the action.  However, in that case the claimant was an 
unsuccessful bidder who was challenging the county's award of 
a bid to another party.  Because there was no right at common 
law to bring such an action, the Procurement Act in that 
instance created "the substantive right to file an action 
against a county," and, under those circumstances, any special 
limitation on the exercise of that right became a part of the 
substantive cause of action and thus a condition precedent.   
 
 
 
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require that the notice of intent be separate and distinct 
from the claim itself in time or in form.  By identifying more 
than one event that triggers the filing of an intent to file a 
claim, the statute acknowledges that not all claims will arise 
under the same circumstances.  For example, a dispute over 
payment under the contract may not arise until the work is 
completed, preventing a contractor from giving notice of an 
intent to file a claim for such payment at the "beginning of 
the work upon which the claim is based."  Thus, the timing and 
form of an alleged notice of intent pursuant to Code § 11-
69(A) requires an examination of the circumstances of each 
case. 
Here, the VDBA informed the Center by letter dated 
December 18, 1998 that the VDBA would not reimburse the Center 
for services rendered in 1999 "until [the Center] ha[d] 
returned a signed copy of the Memorandum of Agreement."  The 
Center nevertheless continued to provide its services without 
a signed memorandum of agreement for 1999.  The Center was 
aware of the condition for payment of its expenses for more 
than six months before it submitted its invoices.  At no time 
before submission of its invoices in June 1999 did the Center 
inform the VDBA that it intended to claim reimbursement for 
those services in the absence of a memorandum of agreement.  
Under these circumstances, the invoices filed in June 1999 
 
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were insufficient to comply with the provision of Code § 11-
69(A) requiring a notice of intent to file a claim at the 
"time of the occurrence or beginning of the work upon which 
the claim is based." 
The Center also argues that its claim was valid because 
it complied with the notice requirements of Code §§ 2.1-223.1 
and 8.01-192.  However, as noted by the VDBA, the Procurement 
Act is a specific statute relating to the acquisition of 
services by public bodies and thus prevails over the more 
general statutes relating to the presentation of pecuniary 
claims against the Commonwealth.  See Commonwealth v. Brown, 
259 Va. 697, 706, 529 S.E.2d 96, 101 (2000). 
In conclusion, for the reasons stated, we hold that the 
trial court did not err in dismissing the Center's motion for 
judgment with prejudice, and we will affirm the judgment of 
the trial court. 
Affirmed.
 
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