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Hensel Phelps Construction Co. v. Thompson Masonry Contractor, Inc.

Supreme Court of Virginia

November 3, 2016

HENSEL PHELPS CONSTRUCTION COMPANY
v.
THOMPSON MASONRY CONTRACTOR, INC., ET AL.

         FROM THE CIRCUIT COURT OF MONTGOMERY COUNTY Robert M.D. Turk, Judge

          PRESENT: Lemons, C.J., Goodwyn, Powell, Kelsey, and McCullough, JJ., and Russell and Millette, S.JJ.

          OPINION

          LEROY F. MILLETTE, JR. SENIOR JUSTICE

         This appeal concerns whether an action by a government contractor against its subcontractors and sureties was timely filed. We address whether the subcontracts waived the applicable statute of limitations through reference to the prime contract between the general contractor and a Commonwealth agency that was not subject to the statute of limitations, or, if the statute of limitations was not waived, whether it had expired. For the reasons stated herein, we conclude that the circuit court did not err in finding the action time-barred.

         I. FACTS AND PROCEEDINGS

         This appeal arises from a lawsuit initiated by Hensel Phelps Construction Company ("Hensel Phelps") against its subcontractors, Thompson Masonry Contractor, Inc. ("Thompson"), Espina Stone Company ("Espina"), I.N. McNeil Roofing & Sheet Metal Company, Inc. ("McNeil"), and Snyder Waterproofing, d/b/a Snyder & Associates ("Snyder") (collectively, "subcontractors"), and subcontractors' sureties Fidelity and Deposit Company of Maryland ("F&D"), and United States Fidelity and Guaranty Company ("U.S. F&G") (collectively, "sureties"). As this case was decided on a plea in bar and demurrer, the Court considers the facts as pled by Hensel Phelps in its complaint as well as the contract documents produced by Hensel Phelps in response to a motion craving oyer. See EMAC, L.L.C. v. County of Hanover, 291 Va. 13, 20-21, 781 S.E.2d 181, 184-85 (2016) (observing that when ruling on a demurrer and motion to dismiss to ascertain whether the allegations of a complaint present a valid cause of action, all facts properly pled and any reasonable inferences arising from those facts are accepted as true, and that "documents brought into a case as a result of a motion craving oyer are incorporated into the pleadings and may be used to 'amplify' the facts alleged in a complaint") (alteration omitted).

         In 1997, Virginia Polytechnic Institute & State University ("Virginia Tech") awarded Hensel Phelps a prime contract worth $15, 539, 000 for construction work on the Student Health & Fitness Center / McComas Hall. Hensel Phelps, as prime contractor, hired Thompson, Espina, McNeil, and Snyder as subcontractors to complete portions of the project. U.S. F&G acted as surety to Espina; F&D acted as surety to both Thompson and McNeil.

         The prime contract includes a paragraph entitled "Warranty of Materials and Workmanship, " warranting that materials shall be in "first class condition, " "all workmanship shall be of the highest quality" and "[w]ork not conforming to these warranties shall be considered defective." The prime contract includes provisions for final inspection and final payment. It also includes a provision entitled "Guarantee of Work, " stating that, "Except as otherwise specified, all work shall be guaranteed by the Contractor against defects resulting from the use of inferior materials, equipment or workmanship for one (1) year from the date of final acceptance of the entire project by [Virginia Tech] in writing, " but that "[n]othing in this section shall be construed to establish a period of limitation with respect to any other obligation which the Contractor might have under the Contract Documents, including liability for defective work under [the Warranty provisions]." There is no explicit provision in the prime contract relating to the applicable statute of limitations period, but the parties do not dispute that, in accordance with Code § 8.01-231, no limitations period would apply to Virginia Tech as a Commonwealth agency.[1]

         Construction began in 1997 and was substantially completed under the prime contract in 1998. Virginia Tech made final payment to Hensel Phelps in 1999, which in turn made final payment to the subcontractors. Espina Stone returned to fix an identified problem covered by their warranty, and it concluded all work by June 2000.

         Virginia Tech later discovered defective workmanship in the project's construction, and elected to remove, replace, or repair these defects. In April 2012, Virginia Tech asserted a claim against Hensel Phelps under the prime contract, seeking $7, 186, 178 in compensation for the cost of remedying the defective workmanship. In October 2013, Hensel Phelps demanded that the subcontractors pay Virginia Tech costs attributable to their defective workmanship, but the subcontractors failed to do so. In 2014, Hensel Phelps paid Virginia Tech $3, 000, 000 to settle the claim, and that same year filed this action, alleging breach of contract and common law indemnity claims against the subcontractors, and breach of contract claims against the sureties.

         Subcontractors and sureties filed pleas in bar arguing that the statute of limitations barred the breach of contract claims, and the subcontractors also demurred to the common law indemnity claims. On June 10, 2015, the circuit court granted the pleas in bar as to breach of contract, sustained the demurrers on indemnity, and dismissed the case in its entirety. Hensel Phelps appeals the circuit court order granting subcontractors' and sureties' pleas in bar on the breach of contract claims.

         II. DISCUSSION

         A. Standard of Review

         The pleas in bar were granted without an evidentiary hearing, based on undisputed facts and the applicable contracts and statutes. Accordingly, we review the circuit court's ruling on the pleas in bar as to the statute of limitations ...


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