Present: Koontz, Kinser, Lemons, Goodwyn, and Millette, JJ.,
and Carrico and Lacy, S.JJ.
TC MIDATLANTIC DEVELOPMENT, INC.
v. Record No. 091271 OPINION BY SENIOR JUSTICE
ELIZABETH B. LACY
COMMONWEALTH OF VIRGINIA, JUNE 10, 2010
DEPARTMENT OF GENERAL SERVICES,
ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Margaret P. Spencer, Judge
In this construction contract dispute, the dispositive
issue is whether the trial court erred in sustaining a demurrer
and dismissing an amended complaint on the ground that
compliance with conditions precedent was not adequately pled.
BACKGROUND
In May of 2004, TC MidAtlantic Development, Inc. (TCM)
entered into a Comprehensive Agreement with the Commonwealth of
Virginia, Department of General Services (DGS) to perform work
on the Washington and Finance Buildings (Phase I) and a proposal
by TCM to perform work on the 8th Street Complex (Phase II).
Phase II had not received legislative or gubernatorial approval
or authorization but the Comprehensive Agreement provided that,
as part of the review and report prepared to secure the
requisite governmental approvals, TCM would undertake certain
planning activities with regard to Phase II at no cost to DGS.
The design-build contracts for Phase I were incorporated in and
attached to the Comprehensive Agreement.
Several disputes arose between TCM and DGS in connection
with the project. The parties exchanged a number of
communications and engaged in mediation in December, 2006;
however, the claims were not resolved. DGS sent a letter to TCM
dated February 16, 2007, terminating the Comprehensive Agreement
as it related to Phase I, the Finance and Washington buildings,
and informing TCM it was not going forward with Phase II, the
8th Street Complex. The letter also stated that TCM was
“entitled as of the date of this letter to file any formal
claims on these projects pursuant to the provisions of Section
47 of the General Terms and Conditions of the Comprehensive
Agreement.” Section 47 provided in relevant part:
Contractual claims . . . shall be submitted, in
writing, no later than sixty (60) days after final
payment; however, written notice of the Contractor’s
intention to file such claim must be given at the
time of the occurrence or beginning of the Work upon
which the claim is based. The filing of a timely
notice is a prerequisite to recovery under this
Section. . . . All claims shall be submitted along
with all practically available supporting evidence
and documentation.
No written decision denying a claim or addressing
issues related to the claim, if rendered prior to
final payment, shall be considered a denial pursuant
to this Section unless the written decision makes
express reference to this Section and is signed by
the Agency head or his designee. The Contractor may
not institute legal action prior to receipt of the
Owner’s final written decision on the claim unless
the Owner fails to render such a decision within
ninety (90) days of submission of the claim or within
ninety (90) days of final payment, whichever is
later.
2
TCM instituted this litigation in April 2007 by filing a
complaint asserting seven counts based on the termination of
Phases I and II of the Comprehensive Agreement and its subparts.
DGS filed a plea in bar and motion to dismiss asserting inter
alia that TCM’s complaint failed to comply with the requirements
of Section 47 of the General Conditions of the Comprehensive
Agreement and therefore did not state a cause of action. 1
Without ruling on the plea in bar and motion to dismiss, the
trial court allowed TCM to file an amended complaint. TCM filed
an amended complaint in September 2007 in which it asserted five
counts and attached a number of documents purporting to
demonstrate that it had complied with the requirements of
Section 47. DGS responded by filing a demurrer, plea in bar,
and motion to dismiss, asserting that the amended complaint and
its exhibits still “fail[ed] to allege submission of a timely
claim in compliance with Section 47."
Following briefing and argument, the trial court entered an
order dated December 17, 2007, sustaining DGS’ demurrer and
dismissing the amended complaint with prejudice and without
leave to amend. In its order, the trial court concluded that
the February 16, 2007 letter from DGS began the 60-day period
for filing formal claims under Section 47. The trial court went
1
DGS also filed a counterclaim which was subsequently non-
suited.
3
on to hold that TCM did “not submit any documentation or make
reference to a formal claim submitted within the sixty-day time
period.” TCM subsequently filed motions for reconsideration and
to amend the dismissal order, both of which the trial court
denied. 2 We awarded TCM an appeal.
DISCUSSION
On appeal TCM raises three assignments of error asserting
that the trial court erred in granting DGS’ demurrer and denying
TCM’s motion for reconsideration, and abused its discretion by
refusing to allow TCM to amend its amended complaint. We will
consider these issues in order.
I.
In its first assignment of error TCM complains that the
trial court erred in sustaining DGS’ demurrer and denying the
motion for reconsideration with regard to Counts I through IV of
the amended complaint. This error, according to TCM, occurred
because the trial court resolved the merits of the case,
misinterpreted Section 47, did not properly evaluate TCM’s
pleadings, and erred in holding that “TCM failed to submit a
timely claim and complaint.”
2
TCM’s first appeal was dismissed without prejudice because
DGS’ counterclaim had not been resolved and, therefore, the
December 17, 2007 order was not a final, appealable judgment.
On remand, TCM filed its motion to amend which was denied and
DGS non-suited its counterclaim. TCM then filed a timely
appeal.
4
TCM and DGS agree that Section 47 required that (1) TCM
submit to DGS written notice of its intent to file a claim at
the time of the occurrence or beginning of the work upon which
the claim is based; (2) TCM file in writing its contractual
claim with documentation within 60 days of the final payment;
(3) DGS render a final decision within 90 days of receiving the
written contractual claim; and (4) legal action be initiated
within six months of the final decision or, if no final decision
was rendered, within six months of the date of the submission of
the claim or the date of final payment, whichever is later.
TCM’s argument that the trial court misinterpreted the
requirements of Section 47 is based on the following language in
the final order:
The Court has reviewed Plaintiff’s
supporting exhibits and finds that Plaintiff
failed to submit a timely claim to Defendant for
a final decision. Plaintiff did not file suit
in this Court until April 24, 2007, more than
sixty days after Defendant’s February 16, 2007
termination letter. Plaintiff failed to file
any other form of final complaint with
Defendant.
TCM argues that in stating that TCM filed this litigation more
than 60 days after the February 16th letter and did not file any
other “final complaint,” the trial court “confused” filing a
claim with filing a complaint in circuit court. We disagree.
Read in context, the final two sentences quoted above mean
that the lawsuit filed in this case could not be considered as
5
compliance with the period in which a claim had to be filed
because it was filed more than 60 days after the February 16th
letter and no other document was filed within the 60-day period.
In referring to other documents which could have been filed, the
trial court was not using the word “complaint” as a word of art
referring to the title given a document used to initiate
litigation. See Rule 3:2(a).
Next, TCM complains that the trial court erred because it
decided the matter on the merits. TCM bases this argument on
the statement in the final order that “[t]he Court finds the
evidence of compliance with Section 47 of the General Terms and
Conditions to be insufficient.” Again we disagree.
TCM attached a number of documents to the amended
complaint. The court reviewed these documents to see if they
supplied the necessary written claims required to be submitted
to DGS within the requisite 60-day period. Referring to
“evidence” and “sufficiency” did not change the nature of the
court’s holding that TCM did “not submit any documentation or
make reference to a formal claim submitted within the sixty-day
time period.”
TCM’s final argument in this assignment of error is that
the trial court erred because TCM adequately pled a cause of
action and, as a result, the demurrer should have been denied.
6
The standard of review applicable here is well established.
A demurrer admits the truth of all material facts properly
pleaded, including facts expressly alleged, fairly viewed as
impliedly alleged, and those which can be fairly and justly
inferred from the facts expressly alleged. In determining
whether the pleading states a cause of action, the court may
also examine any exhibits accompanying the pleading. CaterCorp,
Inc. v. Catering Concepts, Inc., 246 Va. 22, 24, 431 S.E.2d 277,
279 (1993). In this case, because compliance with Section 47 is
a condition precedent to instituting legal action, allegations
of compliance with that section are necessary to state a cause
of action. See Flippo v. F&L Land Co., 241 Va. 15, 22, 400
S.E.2d 156, 160 (1991); Lerner v. Gudelsky Co., 230 Va. 124,
132-33, 334 S.E.2d 579, 584 (1985). Whether a cause of action
is sufficiently pled is a legal issue which we review de novo.
Eagle Harbor L.L.C. v. Isle of Wight County, 271 Va. 603, 611,
628 S.E.2d 298, 302 (2006).
TCM asserts that it sufficiently pled compliance with
Section 47 with regard to the filing of a formal complaint
within the 60-day period in paragraphs 18 and 19 of the amended
complaint. Those paragraphs stated:
18. TCM has made written demands upon DGS for the
payment of all sums properly due and payable to
TCM, and DGS has failed or refused to timely or
fully pay all such sums to TCM.
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19. TCM has made written demands upon DGS for the
performance of DGS’ obligations under the terms
of the Contract Documents for the Project and
pursuant to applicable law. However, DGS has
failed or refused to timely or fully perform its
contractual and legal obligations under the
Contract Documents for the Project and pursuant
to applicable law.
Neither paragraph 18 nor 19 expressly state that TCM
submitted a claim within the 60-day period or in a timely
manner. The phrase “pursuant to applicable law” refers to the
obligations of DGS, not the submission of TCM’s claims. TCM, in
oral argument before this court, posited that because the
pleadings refer to “timely” performance by DGS, the pleading
should be read as impliedly alleging that TCM’s written demands
against DGS were timely. However, reading the express
allegation about DGS' obligation to act “timely” to be an
implied averment with reference to the timeliness of TCM’s
written demands, as TCM suggests, asks the court to indulge an
inference not fairly supported by the pleadings. The pleadings
reflect a choice by the drafter to use the word “timely” in some
places but not in others, and that choice precludes
interpolation of that word by inference where it has not been
used.
TCM goes on to argue that even if paragraphs 18 and 19
alone do not sufficiently address the requirements of Section
47, the letters it submitted to DGS on March 23, 2007 contained
8
its final claims on the Washington and Finance building projects
and thus the trial court erred in sustaining the demurrer and in
denying the motion for reconsideration. 3 We reject this argument
because, as discussed below, the March 23 letters, first
presented to the trial court in TCM’s motion for
reconsideration, were not referenced in the amended pleading nor
made part of that pleading.
TCM unambiguously stated in paragraph 23 of the amended
complaint that the DGS’ termination letter of February 16th
“constituted DGS’ final written decision on TCM’s Project
claims.” (Emphasis added.) This position was reiterated in
TCM’s trial memorandum submitted in opposition to DGS’ demurrer
and in argument at the hearing on the demurrer. The trial court
disagreed with TCM’s characterization of the February 16th
letter as DGS’ final decision, holding in its dismissal order
that the letter initiated the 60-day period which TCM had to
file its claim with supporting documentation. Because no
allegations in the amended complaint or documentation attached
to that complaint addressed claims filed within that period, the
trial court concluded that TCM failed to state a cause of action
3
TCM also claimed that its allegation in paragraph 20 of
the amended complaint, that “TCM and DGS mutually agreed to
submit their collective Project claims to mediation . . . on
December 18, 2006,” was sufficient to satisfy the pleading
requirement of timely submitting claims to DGS. However, under
this allegation, the claims were submitted before the February
16th letter was even sent.
9
because it did not allege the requisite conditions precedent to
filing litigation under Section 47.
After the trial court entered its order dismissing the
amended complaint, TCM filed its motion for reconsideration. In
its motion, TCM asserted that, assuming that the 60-day period
for filing claims began to run from the February 16th letter, it
filed letters with DGS dated March 23, 2007 with attached
schedules showing amounts owed for items in its claims, thus
meeting the pleading deficiency found by the trial court. TCM
appended the March 23 letters to its motion for reconsideration;
however, TCM did not ask for leave to amend its amended
complaint to add the letters or to amend the complaint to allege
that the February 16th letter was something other than a final
decision by DGS. Consequently, the amended complaint continued
to recite that the February 16th letter was DGS’ final decision.
Assuming the March 23 letters constituted the type of claims
required for compliance with Section 47, the letters were
submitted after DGS’ final decision according to the allegations
in the amended complaint.
In considering a demurrer, the trial court was limited to
review of the amended complaint and any attachments to that
complaint. Fun v. Virginia Military Institute, 245 Va. 249,
252, 253, 427 S.E.2d 181, 183 (1993). The March 23 letters were
not associated with the amended complaint in any way and the
10
amended complaint continued to state that the February 16th
letter was DGS’ final decision on TCM’s claims. Under these
circumstances, we cannot say the trial court erred in granting
DGS’ demurrer and in denying TCM’s motion for reconsideration
with regard to Counts I through IV of the amended complaint. 4
II.
In its second assignment of error, TCM asserts that the
trial court erred in sustaining the demurrer as to Count V of
the amended motion for judgment. Count V asserted breach of
contract and wrongful termination of Phase II, the 8th Street
Complex. According to TCM, Phase II was not subject to Section
47 and, therefore, the trial court erred in applying the
provisions of that section to Count V of the amended complaint.
Section 25 of the Comprehensive Agreement, entitled
“Resolutions of Disputes, Claims and Other Matters,” stated in
relevant part:
Except as specifically set forth in the General Conditions,
all disputes, claims and other matters in question between the
parties shall be resolved as follows:
(a) Disputes, claims and other matters in
question between the parties involving matters
covered by the Design-Build Contract shall be
governed by Section 47 of the General
Conditions.
4
TCM has not appealed the trial court’s conclusion
regarding the nature of the February 16th letter. At oral
argument in this Court, TCM asserted that the characterization
of the letter as DGS’ final decision in paragraph 20 of the
amended complaint was an error.
11
(b) All other disputes, claims and other
matters in question between the parties arising
under this Agreement shall be governed as
follows:
(i) The parties shall attempt in good
faith to settle the dispute by
mediation before resorting to
litigation as provided below.
. . .
(ii) . . . Mediation shall be a
condition precedent to the
institution of a lawsuit pursuant
to this agreement. . . .
Phase II was not the subject of a design-build contract.
Therefore, this provision, as TCM asserts, does not require TCM
to comply with the provisions of Section 47 of the General
Conditions for claims arising from Phase II. 5
Nevertheless, DGS argues that even if Phase II claims were
not subject to Section 47 of the General Conditions, Section
326.0 of the Construction and Professional Services Manual
(CPSM) and Code §§ 2.2-814 and 2.2-815 required TCM “to submit a
written claim for a decision and exhaust the mandatory
administrative procedures” for Phase II claims.
5
DGS asserts that we should not consider this argument here
because TCM did not raise it before the trial court. The record
does not support DGS’ argument. TCM asserted that its claims
related to Phase II were not subject to Section 47 requirements
in its request for suspension or vacation of the trial court’s
December 17, 2007 order, its memorandum in support of its motion
to reconsider, and its motion to amend the December 17, 2007
order.
12
Regardless of the merits of DGS’ position, Code § 8.01-273
provides that in considering a demurrer, “[n]o grounds other
than those stated specifically in the demurrer shall be
considered by the court.” See Klein v. National Toddle House
Corp., 210 Va. 641, 643, 172 S.E.2d 782, 783 (1970). In its
demurrer and memorandum and argument in support of its demurrer,
DGS only asserted the failure to allege compliance with the
provisions of Section 47 of the General Conditions. Failure to
comply with provisions of the CPSM or other statutes was not a
ground specifically stated in the demurrer and therefore cannot
be considered as a basis for granting the demurrer here.
Accordingly, because under the terms of Section 25 of the
Comprehensive Agreement, Phase II was not subject to the
provisions of Section 47 of the General Conditions, the trial
court erred in dismissing Count V of the amended complaint for
failure to allege compliance with that section.
III.
In its final assignment of error, TCM asserts that the
trial court “abused its discretion by refusing to allow TCM to
amend its Amended Complaint.” The record contains no request by
TCM for leave to amend its amended complaint or a proposed
second amended complaint. TCM argues, nevertheless, that it was
“presumptively denied” the opportunity to seek amendment by the
13
recitation in the December 17, 2007 order that the amended
complaint was dismissed “without leave to amend.”
We reject TCM’s view that the language in the final order
precluded TCM from subsequently seeking leave to amend. Motions
for reconsideration challenging a holding or finding in a trial
court judgment are commonplace. The December 17 order did not
preclude TCM from seeking to amend its amended complaint and
therefore we find no merit in TCM’s third assignment of error.
CONCLUSION
In summary, for the reasons stated, we find no error in
that portion of the trial court’s judgment dismissing Counts I –
IV of the amended complaint and we will affirm that portion of
the judgment. We will reverse that portion of the judgment
dismissing Count V of the amended complaint and remand the
matter to the trial court for further proceedings on that Count.
Affirmed in part,
reversed in part,
and remanded.
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