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NEW KENT COUNTY v. WORLEY AVIATION, INC. (59946)


NEW KENT COUNTY v.
WORLEY AVIATION, INC.


JANUARY 9, 1998
Record No. 970236

NEW KENT COUNTY

v.

WORLEY AVIATION, INC.

OPINION BY JUSTICE CYNTHIA D. KINSER
FROM THE CIRCUIT COURT OF NEW KENT COUNTY

Samuel T. Powell, III, Judge
Present: All the Justices


In this appeal, we first consider the jurisdictional
requirements under Code ?? 15.1-550
and 15.1-552 for an appeal from an action of a county board of
supervisors to the circuit court. Next, we address whether a
lessee of land owned by a county is entitled, under the terms of
the lease, to recover the fair market value of a capital
improvement on the leased premises. Because we find that the
lessee satisfied the jurisdictional requirements and constructed
a capital improvement pursuant to a capital improvements plan
approved by the board of supervisors, we will affirm the circuit
court’s judgment in favor of the lessee.

I.

In accordance with a Lease Agreement dated January 24, 1985,
New Kent County (the County) leased the New Kent County Airport
to Worley Aviation, Inc., (Worley) for an initial term of ten
years, with a right to renew the lease for an additional ten-year
term under certain conditions. The lease provisions at issue in
this appeal provided a mechanism by which Worley could construct
a capital improvement on the airport premises and later recover
the fair market value of the improvement if the County did not
renew the lease for an additional term. Specifically, we are
concerned with portions of Sections VI and VII of the lease. In
addition to establishing the initial ten-year term of the lease,
commencing on January 1, 1985, and ending on December 31, 1994,
the relevant portion of Section VII includes the following
provisions:

A. If by December 31, 1989, 1) Lessee submits to Lessor a
capital improvements plan for the construction of aviation
related facilities on the airport property which plan shall
specify the size, type and estimated costs of improvements
shown thereon together with a committment [sic] by Lessee to
begin construction of such improvements if the plan is
approved, and 2) such plan or a variation of the same
acceptable to both parties is approved by the Board of
Supervisors of New Kent County, and 3) Lessee actually
completes construction on the improvements shown in the plan,
then Lessee shall have the right to extend the term of this
lease until December 31, 2004, provided a written request for
such renewal is submitted to Lessor not less than six (6)
months nor more than nine (9) months before the end of the
initial ten (10) year term. Notwithstanding a written request
for extension from Lessee, Lessor reserves the right to
terminate this agreement at the end of the initial ten (10)
year term provided the provisions of Section VI paragraph D
are complied with. Lessor shall provide written notice of any
such termination to Lessee at least six (6) months prior to
the end of the term.

Section VI(D), referenced in Section VII, and Section VI(E)
contain the following terms:

D. If Lessor is found in breach of this agreement or
exercises its right to terminate this lease at the end of the
first ten (10) year term and if Lessee has constructed
capital improvements on the premises pursuant to an approved
capital improvements plan as set out in Section VII paragraph
A, then Lessor shall pay to Lessee the fair market value of
such improvements at the time of such breach or termination.

E. If lessee fails to exercise a right to renew this lease
for an additional ten (10) year term or in the event this
lease is terminated because of Lessee’s failure to perform or
for any other reason other than breach of this agreement by
Lessor, then Lessee shall receive no compensation for any
improvements constructed by Lessee and Lessee shall have no
right to remove such improvements.

In the event Lessee fails to construct improvements in
accordance with the provisions of Section VII paragraph A and
Lessor exercises its right to terminate under Section VII
paragraph B, then Lessee shall receive no compensation for any
improvements constructed by Lessee and Lessee shall have no right
to remove such improvements except as set out in Section VII,
paragraph C.

In a July 8, 1986, letter, Worley submitted to the County
"a capital improvement plan for the construction of aviation
related facility in accordance with Section VII of our Lease
Agreement." The proposed capital improvement consisted of a
new maintenance aircraft hangar along with an office and terminal
building. Worley requested approval of the capital improvement
plan[1] by the Board of Supervisors of
New Kent County (the Board) and also a renewal of its lease to
December 31, 2004, in accordance with Section VII(A), provided
the capital improvements were completed.

The County’s attorney provided copies of Worley’s July 8,
1986, letter and plan to the members of the Board. Worley’s
request for approval was placed on the Board’s agenda for its
October 20, 1986, meeting:

ITEM 5 B REPORT;
REVIEW OF SITE AND CONSTRUCTION PLANS FOR NEW KENT AIRPORT
TERMINAL BUILDING AND MAINTENANCE HANGER [sic] B The Board will review plans
submitted by Mr. A. C. Worley, New Kent Airport Manager, for
construction of a 64′ x 80′ aircraft maintenance hangar along
with a 60′ x 24′ terminal building. The airport lease agreement
requires Board approval of all airport capital improvement
projects undertaken by the airport operator – Worley Aviation,
Inc.

After discussion of the plan and a presentation by Worley, the
Board approved, as stated in its minutes, "the plans for the
new terminal building."[2]

Subsequent to the meeting, the County’s attorney advised
Worley, in a letter dated October 22, 1986, that the Board had
approved "the site and construction plans for the new
terminal and hangar building . . . . These plans
were approved by the Board in accordance with Section IV-A of the
airport lease agreement."[3] Accordingly, Worley obtained a
building permit and proceeded with construction. The building
inspector issued a certificate of occupancy on January 4, 1988.

However, part of the present dispute concerns whether the
construction was in accordance with the approved drawings because
Worley included an apartment area in the building. Those drawings
are no longer available, but the building inspector stated that
part of his inspection was to ensure compliance with the approved
plans.

Several months before the end of the initial ten-year term of
the lease, the Board advised Worley that it did not intend to
renew the lease for an additional term. The County relied on its
right to terminate the lease at the end of the first ten years
provided it complied with Section VI(D) of the Lease Agreement.
Subsequently, the County’s attorney advised Worley that the Board
would be contacting it to invoke the appraisal procedure set
forth in Section VI(C).[4] Eventually, the County and
Worley selected J. Parks Rountrey (Rountrey) as the appraiser for
the purpose of establishing the value of the capital improvement
on the airport premises. Rountrey described the improvement as a
maintenance hangar, office/public building, equipment (fixtures),
and site improvements. He opined that the fair market value of
the improvement was $480,000 as of December 21, 1994.

Despite the agreement to use Rountrey, a dispute arose between
Worley and the County. In a letter dated October 18, 1994, the
County’s new attorney advised Worley for the first time that the
County questioned Worley’s claim for the fair market value of the
capital improvement on the airport premises. The basis for the
dispute was the absence of a reference in the minutes of the
October 20, 1986, meeting to the specific section of the Lease
Agreement under which the Board approved the capital improvement.
Worley then presented its claim to the Board in three separate
letters, the last of which included Rountrey’s appraisal. But at
its January 9, 1995, meeting, the Board denied Worley’s capital
improvement claim along with other claims unrelated to this
appeal.[5]

After the Board’s denial, Worley commenced an appeal to the
circuit court. According to Worley, it first served a written
notice of appeal on the clerk of the Board on February 3, 1995,
and posted an appeal bond. Worley then filed its motion for
judgment in the circuit court. In its grounds of defense, the
County denied that Worley served its written notice of appeal on
the clerk of the Board and posted its bond,[6] but
the County never brought this issue for hearing before the
circuit court.[7]

After ruling on the County’s demurrer and motion for partial
summary judgment, the circuit court conducted a bench trial. At
the trial, the attorney who represented the County at the October
20, 1986, Board meeting testified that he did not recall that the
Board approved any capital improvements plan but "simply the
plans for the one facility." However, the attorney admitted
that the Board approved Worley’s plans as submitted. Likewise, a
member of the Board testified that the Board approved only the
plans for the terminal building and not a capital improvements
plan.[8] Worley, however, testified that
it would not have invested its money if the Board’s approval had
not been pursuant to Section VII(A) of the Lease Agreement.

On November 6, 1996, the circuit court entered a final order
in which it found that "Worley constructed certain capital
improvements on the demised premises; that the capital
improvements were part of a capital improvements plan properly
approved by the Board of Supervisors and constructed; and that
the fair market value of such improvements was $480,000 at the
date of termination of the lease." We awarded the County an
appeal.

II.

In the County’s first assignment of error, it asserts that
Worley did not satisfy the jurisdictional requirements of Code ?? 15.1-550 and
15.1-552. These two sections, along with Code ?? 15.1-553 and
15.1-554, "demonstrat[e] a legislative intent to provide a
comprehensive procedure for the presentation, auditing,
challenge, defense, and judicial review of monetary claims
asserted against a county." Nuckols v. Moore, 234 Va.
478, 481, 362 S.E.2d 715, 717 (1987). Furthermore, "Code ?? 15.1-550 et seq.
provide the exclusive procedure for litigating claims against a
county. Failure to allege compliance with these statutes is fatal
to an action against a county." Burk v. Porter, 222
Va. 795, 797, 284 S.E.2d 602, 603 (1981) (citations omitted).

Code ? 15.1-550
states that "[n]o account shall be allowed by the board of
supervisors unless the same shall be made out in separate items
and the nature of each item specifically stated." The County
contends that Worley never "specifically stated" its
claim to the Board. It argues that Worley failed to establish
that the Board had approved a capital improvements plan and never
provided the Board with the site plan, the working drawings, or
the specifications for the terminal building. We disagree with
the County.

Worley submitted its claim regarding the capital improvement
in three separate letters to the County’s attorney. Included with
the last letter dated January 5, 1995, was Rountrey’s appraisal,
which valued the capital improvement at $480,000, the amount
Worley claimed. Furthermore, the Board’s minutes of its January
9, 1995, meeting listed Worley’s claim for compensation for the
airport terminal building as a separate item. Worley provided
sufficient information for the Board to be apprised of the
nature, basis, and amount of his claim. Thus, we conclude that
Worley satisfied the statutory requirements of Code ? 15.1-550.

The County’s contention that Worley cannot present evidence to
the circuit court that it did not present to the Board is also
without merit. "An ‘appeal’ pursuant to Code ? 15.1-552 is a de
novo
action at law." Carlo v. County of Nottoway,
232 Va. 1, 3, 348 S.E.2d 201, 202 (1986). While Code ? 15.1-552 speaks in
terms of an appeal to the circuit court, "the action of the
board of supervisors is in no proper sense of the term an
adjudication of the claim on its merits
. . . ." Luck Constr. Co. v. County of
Russell
, 115 Va. 335, 338, 79 S.E. 393, 394 (1913). Thus,
Worley was not precluded from presenting evidence to the circuit
court that it did not present to the Board.

To support its argument that Worley did not comply with Code ? 15.1-552, the County
relies on Worley’s failure to introduce into evidence at the
bench trial proof that it served the written notice of appeal on
the clerk of the Board and posted an appropriate bond. This
section provides that, when the board of supervisors denies a
claim, as in this case, the claimant:

may appeal from the decision of the board to the circuit
court of the county within thirty days from the date of the
decision . . . . Such appeal may be taken by
causing a written notice thereof to be served on the clerk of
the board and executing a bond to such county, with
sufficient surety to be approved by the clerk of the board
. . . .

Code ? 15.1-552.

As previously stated, Worley alleged compliance with this
provision, but the County denied the allegations. The County did
not, however, bring this issue for a hearing before the circuit
court, nor did it proffer any reason for the court to question
its jurisdiction. Thus, the circuit court never addressed the
matter, but decided the claim on its merits. The County does not
now assert that Worley did not serve the notice or post bond, but
rather that the record on its face does not show Worley’s
compliance with Code ? 15.1-552.

This Court’s decision in Shelton & Luck v. Sydnor,
126 Va. 625, 102 S.E. 83 (1920), controls the resolution of this
issue. In that factually analogous case, a board of supervisors
allowed a claim for services rendered to the county, and the
Commonwealth’s Attorney appealed the allowance to the circuit
court. The statute under which the appeal was taken required the
Commonwealth’s Attorney to serve a written notice of appeal on
the clerk of the board of supervisors and the party in whose
favor the claim had been allowed, within 30 days after the
decision. As in this case, it was argued that the written notice
of appeal was essential to the circuit court’s jurisdiction and
that the record failed to disclose timely notice.

In Shelton, we held that the circuit court had
jurisdiction to hear the appeal from the board of supervisors:

There is a legal presumption, in the absence of evidence
to the contrary, in favor of the jurisdiction of courts of
record of general jurisdiction. The appeal from the decision
of the board of supervisors to the circuit court could only
be taken in the manner and at the time prescribed by the
statute, and, in the absence of any evidence in the record
before us to the contrary, we must hold that the statement in
the record that the appeal was taken December 1, 1917, means
that the appeal was duly taken in the manner and within the
time prescribed by the statute . . . . [I]t is
not now claimed that notice was not duly served or appearance
duly entered, but simply that the record does not on its face
show such service or appearance. Under such circumstances
every presumption will be indulged in favor of the
correctness of the judgment of the circuit court.

Shelton, 126 Va. at 633, 102 S.E. at 86. We further
stated in Shelton that "the case appears to have been
tried in the circuit court without . . . an objection
or exception on that account. If the notice was not given or
appearance entered within the time required by law that fact
could have been readily determined if the question had been
raised in the trial court." Id. at 634, 102 S.E. at
87.

Like the Commonwealth’s Attorney in Shelton, the County
did not raise any objection to the circuit court’s jurisdiction
when it was hearing the case. The County’s denial in its grounds
of defense is not sufficient. If the County had a basis for
believing that Worley did not comply with Code ? 15.1-552, it should
have squarely presented that issue to the circuit court. Then it
would have been incumbent upon Worley to prove that it had, in
fact, timely served the notice of appeal and posted bond. Thus,
we will apply the presumption enunciated in Shelton and
hold that Worley satisfied the notice and bond requirements of
Code ? 15.1-552.[9]

In the County’s final assignment of error, it challenges the
lower court’s factual findings. The County first argues that the
Board never approved a capital improvements plan. The County
premises this argument on the fact that the October 20, 1986,
meeting agenda and minutes did not include the term "capital
improvements plan." It also relies on witnesses’ testimony
that the Board approved only the construction of the terminal
building–not a capital improvements plan.

"As the fact finder, the trial court determines the
credibility of the witnesses and the weight of their testimony;
its findings, therefore, will not be disturbed on appeal unless
plainly wrong or without evidence to support them." Bankers
Credit Serv. of Vermont, Inc. v. Dorsch
, 231 Va. 273, 275,
343 S.E.2d 339, 341 (1986); see also Code ? 8.01-680.
Accordingly, we will use this standard to review the circuit
court’s factual findings.

We agree that the evidence amply supports the trial court’s
finding that the Board approved a capital improvements plan under
Section VII(A) of the Lease Agreement. When Worley initiated the
approval process with its July 8, 1986 letter, it called the new
construction a capital improvement plan under Section VII. Even
though the staff report to the Board incorrectly referred to
Section IV(A), it also advised the Board that Worley requested
approval not only for the construction but also for an extension
of the lease until December 31, 2004, in accordance with Section
VII(A). The staff report explained that under Section VII(A),
Worley had the right to request the extension if it submitted a
capital improvements plan for approval before December 31, 1989.

In addition, while Item 5 on the meeting agenda did not use
the phrase "capital improvements plan," it addressed
the plans that Worley submitted. The agenda, along with copies of
Worley’s letter and the staff report, was in the handbooks
belonging to the Board members and to some of the County’s staff.
Further, the Board’s minutes for the October 20, 1986, meeting
reflect that the Board approved Worley’s plans.

Several years later, when the Board decided not to renew the
lease for an additional term, it relied on its right to terminate
the lease under Section VII, which in turn requires that the
provisions of Section VI(D) be followed. Section VI(D) obligates
the County to pay Worley the fair market value of capital
improvements on the premises that were built pursuant to an
approved capital improvements plan. Thus, we conclude that the
circuit court did not err in finding that the Board had approved
a capital improvements plan under Section VII(A) of the Lease
Agreement.

The final factual error alleged by the County involves the
lease provision that requires Worley "actually [to] complet[e] construction on the improvements shown in the
plan." The County does not dispute that Worley completed the
construction. Instead, it claims that the building constructed by
Worley was not the construction approved by the Board. However,
the plans or drawings that the Board approved are no longer
available. If Worley deviated from the approved plans, it
actually built more, i.e., an apartment area, than was
encompassed by the original plans. Moreover, the building
inspector testified that he had reviewed the construction plans
before issuing the building permit and had inspected the building
before granting Worley a certificate of occupancy. He further
stated that part of his inspection had been to verify that the
building was constructed according to the approved plans.

For these reasons, we will affirm the circuit court’s judgment
awarding Worley $480,000 as the fair market value of the capital
improvement constructed on the airport premises.

Affirmed.

 

 

 

 

FOOTNOTES:

[1] Section VI(A) of the Lease
Agreement addresses Worley’s right to "construct and/or
erect improvements on the premises" with the County’s
approval. In contrast to Section VII(A), Section VI(A) does not
use the term "capital improvement."

[2] The Board did not vote on
Worley’s request to renew the lease for an additional ten-year
term.

[3] The parties agree that the
reference to "Section IV-A" in this letter is not
correct.

[4] The pertinent portion of
Section VI(C) contains the following terms:

When the "fair market value" of a building or
structure or improvement must be determined for purposes of
this lease, it shall be established by a qualified appraiser
agreed upon by Lessor and Lessee.

[5] The minutes of the January 1995
Board meeting state that "the Lease Agreement
. . . does not require the County to compensate Worley
Aviation for the terminal building . . . and that the
claimants have failed to establish or prove their claims and have
failed to comply with Section 15.1-550 of the Code of Virginia in
the presentation of their claims."

[6] The County also mentioned this
alleged failure in a footnote in its trial brief and as an
exception to the circuit court’s final order.

[7] Worley alleged service of the
written notice on the clerk of the Board and posting of its bond
in paragraphs 12 and 13 of its motion for judgment. It provided
additional details about these matters in its answer to the
County’s interrogatories. The County filed this interrogatory
answer as an exhibit with its memorandum in support of its
demurrer and motion for partial summary judgment. Worley did not
introduce the written notice or bond into evidence before the
circuit court.

[8] At the bench trial, several
agenda books for the October 20, 1986, meeting were introduced
into evidence. The books belonged to one of the supervisors, the
County’s administrator, the County’s assistant administrator and
director of planning, and the County’s attorney. Each of these
books contained copies of the agenda, Worley’s July 8, 1986,
letter, and a staff report recommending that the Board approve
"the site plan for the construction but not the request for
extension of the lease . . . ."

[9]
The County also contends that Worley cannot rely on its
interrogatory answer as proof that it complied with Code ? 15.1-552. We do not reach
this issue since we are not relying on the interrogatory answer
in our decision.

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