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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