PRESENT: ALL THE JUSTICES
MARK FIVE CONSTRUCTION, INC.,
TO THE USE OF AMERICAN ECONOMY
INSURANCE CO. OPINION BY
JUSTICE G. STEVEN AGEE
v. Record No. 061304 June 8, 2007
CASTLE CONTRACTORS, ET AL.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Michael P. McWeeney, Judge
Mark Five Construction, Inc., t/u/o American Economy
Insurance Company, (“Mark Five”) appeals the judgment of the
Circuit Court of Fairfax County which sustained a demurrer filed
by defendants Castle Contractors and James W. Finley, Jr. Mark
Five contends the circuit court erred because the amended motion
for judgment filed by Mark Five asserted a “good cause of
action” for indemnity under Code § 65.2-304 sufficient to
survive a demurrer. For the reasons set forth below, we will
affirm the judgment of the circuit court.
I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW
Under well-established principles of appellate review, we
consider the facts as set forth in the amended motion for
judgment, “along with those reasonably and fairly implied from
them, in the light most favorable to the plaintiff.” Doe v.
Zwelling, 270 Va. 594, 597, 620 S.E.2d 750, 751 (2005). In
addition, because Mark Five’s amended motion for judgment “does
not incorporate or refer to any of the allegations that were set
forth in [the] prior motion for judgment, we will consider only
the allegations contained in the amended pleading to which the
demurrer was sustained.” Yuzefovsky v. St. John’s Wood
Apartments, 261 Va. 97, 102, 540 S.E.2d 134, 136 (2001).
Mark Five, a construction firm incorporated in Maryland and
licensed to do business in Virginia, contracted to restore a
house in Virginia that had been damaged by fire. Some of the
work was subcontracted to Castle Contractors, whose principal
place of business is in Maryland.1 Daniel Gonzalez, an employee
of Castle Contractors, sustained injuries after falling from the
roof during the course of the restoration work. Gonzalez filed
workers’ compensation claims against Mark Five and Castle
Contractors.
A deputy commissioner of the Virginia Workers’ Compensation
Commission denied Gonzalez’ claim, ruling that although Mark
Five was Gonzalez’ statutory employer at the time of the injury,
neither Mark Five nor Castle Contractors was subject to the
Virginia Workers’ Compensation Act (“the Act”), Code §§ 65.2-100
through –1310, because each lacked a sufficient number of
employees “regularly in service” in Virginia to come within the
1
James W. Finley is the sole owner of Castle Contractors.
The co-defendants will be referred to collectively as “Castle
Contractors.”
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jurisdictional requirements of the Act.2 Gonzalez asked the full
Commission to review the deputy commissioner’s ruling only as to
Mark Five. The Commission reversed the deputy commissioner’s
ruling, and found that Mark Five had the requisite “number of
employees regularly in service in . . . Virginia” to be subject
to the jurisdiction of the Act. Consequently, it awarded
Gonzalez workers’ compensation benefits.3 The Commission’s
decision was subsequently affirmed by the Court of Appeals.4
Mark Five Constr. Co. v. Gonzalez, 42 Va. App. 59, 590 S.E.2d 81
(2003).
Mark Five filed an amended motion for judgment in the
circuit court5 claiming that, pursuant to Code § 65.2-304,6 it
was “entitled to indemnification from [Castle Contractors] for
2
Under Code § 65.2-101, employers are only subject to the
Act if they employ three or more employees regularly in service
within the Commonwealth.
3
Pursuant to a general liability insurance policy held by
Mark Five, American Economy Insurance Company has been paying
these benefits to Gonzalez.
4
Mark Five’s liability under the Act, and its obligation to
fulfill the award to Gonzalez, are not at issue in the case at
bar.
5
As amended, Mark Five filed the case at bar as “Mark Five
Construction, Inc., to the use of American Economy Insurance
Company.”
6
Code § 65.2-304 states, in relevant part:
When the principal contractor is liable to pay
compensation under § 65.2-302 or § 65.2-303, he shall
be entitled to indemnity from any person who would
have been liable to pay compensation to the worker
independently of such sections or from an intermediate
contractor and shall have a cause of action therefor.
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the benefits paid to Mr. Gonzales . . . in that [Castle
Contractors] was an intermediate contractor of Plaintiff Mark
Five and/or would have been liable to pay compensation to Mr.
Gonzales independently of Va. Code Ann. § 65.2-302.”
Castle Contractors filed a demurrer, contending “the
[Amended] Motion for Judgment fails to allege[] sufficient
facts, which if proven, would support a claim for
indemnification pursuant” to Code § 65.2-304. In its memorandum
in support of the demurrer, Castle Contractors argued Mark Five
failed to allege “that [Castle Contractors is] subject to the
jurisdiction of [the Act],” which is “a condition precedent to
any claim for recovery under [Code § 65.2-304].”
After hearing the parties’ arguments, the circuit court
sustained the demurrer by an order entered on March 31, 2006.7
We awarded Mark Five this appeal.
II. ANALYSIS
Mark Five contends the circuit court “erred in sustaining
Castle Contractors’ demurrer” because the amended motion for
judgment “established a ‘good cause of action’ if the facts as
alleged were proven.” It claims that “[b]ased on the words
selected and omitted by the legislature, there is simply no
basis for limiting Virginia Code § 65.2-304’s application to
7
The circuit court gave Mark Five leave of 21 days to
further amend the motion for judgment. Instead, on April 21,
2006, Mark Five filed a notice of appeal to this Court.
4
persons liable to pay compensation under [the Act].” Mark Five
asserts that because Castle Contractors was held liable by the
Maryland Workers’ Compensation Commission for Gonzalez’
compensation claim under Maryland law, the amended motion for
judgment articulated a claim that Castle Contractors was “liable
to pay compensation,” as required under Code § 65.2-304.
Castle Contractors responds that the circuit court did not
err because a “party seeking indemnity under [Code § 65.2-304]
must first establish that the [employer] from which indemnity is
sought, is subject to the jurisdiction of the [Act] before any
right to indemnity arises under the statute.” Castle
Contractors notes that Mark Five has conceded that Castle
Contractors was not subject to the Act. Accordingly, Castle
Contractors claims that the amended motion for judgment did not,
and could not, state a cause of action for indemnity under the
Act.
We examine the circuit court’s decision to sustain Castle
Contractors’ demurrer under a de novo standard of review because
it is a pure question of law. Glazebrook v. Board of
Supervisors, 266 Va. 550, 554, 587 S.E.2d 589, 591 (2003). “A
demurrer tests the legal sufficiency of facts alleged in
pleadings, not the strength of proof.” Id. A demurrer will be
sustained when the pleading it challenges lacks “sufficient
definiteness to enable the court to find the existence of a
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legal basis for its judgment.” Hubbard v. Dresser, Inc., 271
Va. 117, 122, 624 S.E.2d 1, 4 (2006) (quoting Moore v. Jefferson
Hospital, Inc., 208 Va. 438, 440, 158 S.E.2d 124, 126 (1967).
Based on these well-settled principles governing our review, we
find the circuit court did not err in sustaining Castle
Contractors’ demurrer.
Code § 65.2-304 allows a “principal contractor” who “is
liable to pay compensation under § 65.2-302 or § 65.2-303” to
seek “indemnity from any person who would have been liable to
pay compensation to the worker independently of such sections.”
This provision, however, must be read in the context of the
entire Act. When so read, it is clear Mark Five’s construction
of Code § 65.2-304 cannot prevail.
The General Assembly “created the Workers’ Compensation
scheme as a carefully balanced societal exchange between the
interests of employers, employees, insurers, and the public.”
Morris v. Morris, 238 Va. 578, 584, 385 S.E.2d 858, 862 (1989).
In so doing, the General Assembly determined that only certain
employers and employees are to be covered by the Act and thus
subject to jurisdiction for proceedings under the Act. Among
the employers who are not liable to pay worker’s compensation
under the Act are those who have less than three employees
“regularly in service” in the Commonwealth. Code § 65.2-
101(2)(h) (Under the Act “ ‘[e]mployee’ shall not mean . . .
6
[e]mployees of any person, firm or private corporation,
including any public service corporation, that has regularly in
service less than three employees in the same business within
this Commonwealth.”); see also Uninsured Employer’s Fund v.
Gabriel, 272 Va. 659, 663, 636 S.E.2d 408, 411 (2006). Such an
employer is thus not subject to jurisdiction for proceedings
under the Act. Id.
In the case at bar, the parties agree that Castle
Contractors falls within this exception and is therefore not
subject to pay compensation under the Act and not subject to
jurisdiction under the Act. If we were to adopt Mark Five’s
expansive reading of which persons “would have been liable to
pay compensation” under Code § 65.2-304, this exception to the
Act would be meaningless. Defendants such as Castle
Contractors, who are otherwise excepted from the Act, would
nonetheless be liable to pay compensation under the Act in Mark
Five’s reading of the indemnification provisions of Code § 65.2-
304. However, nothing in that statute reflects a legislative
intent to alter the clear provisions of Code § 65.2-101, which
remove Castle Contractors from the Act’s jurisdiction.
Furthermore, although “compensation” is not a defined term
under Code § 65.2-101 of the Act, the Act establishes and
governs Virginia’s scheme of worker’s compensation. Within that
context, the term “compensation” in Code § 65.2-304 refers to
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compensation payable under the Act’s provisions. Therefore, a
person seeking indemnity under Code § 65.2-304 must show that
the defendant was a person “liable to pay compensation” under
the Act and subject to jurisdiction under the Act. For the
reasons set forth above, Mark Five cannot make that showing as
to Castle Contractors as a matter of law.
III. CONCLUSION
A party can only seek indemnification under Code § 65.2-304
from persons who would have been liable to pay compensation
under the Act and thus are subject to jurisdiction under the
Act. Mark Five did not allege in its amended motion for
judgment that Castle Contractors was such a person.
Accordingly, we find no error in the circuit court’s judgment
sustaining Castle Contractors’ demurrer to the amended motion
for judgment, and we will affirm the judgment of the circuit
court.
Affirmed.
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