Hensel Phelps Constr. Co. v. Thompson Masonry Contractor, Inc.
791 S.E.2d 734
| Va. | 2016Background
- Hensel Phelps was the prime contractor on a Virginia Tech construction project (1997–98) and hired subcontractors Thompson, Espina, McNeil, and Snyder; sureties F&D and U.S. F&G guaranteed some subcontracts.
- Prime contract contained warranty and one‑year guarantee clauses and, as a Commonwealth contract, was not subject to ordinary limitations under Code § 8.01‑231.
- Subcontracts incorporated the prime contract by reference and included performance warranties and a separate Article 22 titled “Indemnification” (which broadly indemnified Hensel Phelps, including for its own negligence).
- Virginia Tech discovered defective work and pursued Hensel Phelps in 2012; Hensel Phelps paid $3,000,000 to settle in 2014 and sued the subcontractors and sureties that year for breach of contract and common‑law indemnity.
- Defendants filed pleas in bar and demurrers; the trial court sustained the pleas and demurrers and dismissed the suit as time‑barred. The Supreme Court of Virginia affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether subcontracts waived the 5‑year statute of limitations by flowing down the prime contract (which had no limitations as against the Commonwealth) | Flow‑down language incorporated the prime contract and thus waived subcontractors’ limitations period | General incorporation and flow‑down language do not show express knowledge of and intent to relinquish the subcontractors’ limitations defense | No waiver; incorporation language insufficient to constitute an express waiver of the limitations period |
| Whether the claims accrued only upon Hensel Phelps’ payment/settlement in 2014 (invoking Code § 8.01‑249(5) for indemnity or a separate later breach) | Accrual should be when Hensel Phelps paid Virginia Tech (2014), so suit is timely | The asserted claims are breach‑of‑contract/performance claims that accrued at the time of breach (during performance/completion), not at later settlement | Accrual occurred upon subcontractor breach (1997–2000 window); § 8.01‑249(5) inapplicable because plaintiff sued for breach of contract, not indemnification |
| Whether performance‑warranty and payment provisions functioned as independent indemnities that would trigger later accrual | Warranty/payment clauses impose indemnity‑like obligations and thus accrual should follow payment/indemnity rule | Those clauses are performance warranties (obligation to repair/perform), not standalone indemnities; true indemnity paragraph was void under Uniwest for attempting to indemnify employer’s own negligence | Provisions construed as performance obligations subject to the 5‑year contract limitations; not independent indemnities |
| Whether subcontractors’ obligations were continuing (delaying accrual) | Obligations to correct defects created a continuing duty, so limitations did not begin until termination or discovery | The undertaking was finite (performance and warranty/repair period); no ongoing periodic duty that delays accrual | No continuing‑obligation exception; statute began to run at breach/completion and expired before 2014 |
Key Cases Cited
- EMAC, L.L.C. v. County of Hanover, 291 Va. 13 (incorporation of documents via craving oyer can amplify pleadings)
- Van Dam v. Gay, 280 Va. 457 (accrual rule and de novo review of statute‑of‑limitations pleas)
- Uniwest v. Amtech Elevator Services, Inc., 280 Va. 428 (indemnity clauses that purport to indemnify indemnitee’s own negligence are unenforceable)
- May v. Martin, 205 Va. 397 (waiver requires knowledge of right and intent to relinquish it)
- Babcock & Wilcox Co. v. Areva NP, Inc., 292 Va. 165 (contracts construed as a whole; avoid emphasis on isolated clauses)
- Thorsen v. Richmond SPCA, 292 Va. 257 (injury required for accrual; accrual rule does not await full measure of damages)
- Cauthorn v. British Leyland, U.K., Ltd., 233 Va. 202 (warranty claims sound in contract and are governed by contract limitations)