Virginia Lawyers Weekly VA Lawyers Weekly
Where the commonwealth billed construction companies and others more than $7 million for flooding damages resulting from a ruptured water line, the commonwealth comptroller’s suit under the Virginia Debt Collection Act to recover damages, interest, attorney’s fees and costs is dismissed for lack of standing.
The court will not approve the comptroller’s attempt to retroactively confer himself with standing by amending a policy manual after the suit was filed.
Background
The Virginia Commonwealth University Health System Authority is a political subdivision of the commonwealth. The authority hired a team of companies to design and construct an outpatient pediatric facility and a utility pathway at Virginia Commonwealth University. The pathway would be connected to Sanger Hall, a building the commonwealth owned on VCU’s campus.
During the pathway’s construction, a 10-inch water line ruptured and flooded Sanger Hall. The commonwealth billed defendants more than $7 million for damages. Later, the commonwealth’s comptroller sued, alleging negligence and trespass, but sought damages, interest, attorney’s fees and costs under the VDCA.
Defendants filed demurrers on several grounds, including lack of standing.
Relevant law
Under Virginia Supreme Court precedent, a new plaintiff cannot be substituted for an original plaintiff who lacked standing. The only remedy is a nonsuit and a new action naming the proper plaintiff.
Under Code § 2.2-4800, state agencies and institutions are conferred with the authority to collect “all accounts receivable.” Code § 2.2-4801 defines “accounts receivable,” in part, as debts due to the commonwealth :as defined in the guidelines adopted by the State Comptroller.”
Code § 8.01-196 provides that the comptroller “shall institute … all proceedings to enforce payment of money to the Commonwealth.” An enforcement action may be instituted “against any person indebted or liable to the Commonwealth[.]”
When the complaint was filed in this case, the comptroller’s Commonwealth Accounting Policies and Procedures Manual provided that “accounts receivable” included, among other things, any amount for owed for taxes, loans, notes receivable, licenses and fees, court judgments, fines and costs.
After suit was filed in this case, the comptroller amended the CAPP Manual to provide that “accounts receivable” included any claim for a debt owed under a contract, tort, subrogation or any other legal theory, whether or not the debt has been adjudicated, reduced to a judgment or has been part of a collection effort. This included any demand for payment from a state agency. The amendment also defined the term as expenses or damages arising from property damage, including those caused by negligent operation of a motor vehicle.
Discussion
Plain language in the VDCA and Code §§ 8.01-198 and 8.01-198 “demonstrate that the Comptroller lacks standing in this action.” The code sections indicate the comptroller can “enforce” payment of money by a person “indebted or liable” to the commonwealth. That is, the comptroller has the authority to institute proceedings against “persons already deemed legally obligated” to pay the commonwealth money. “That is not this case.”
The comptroller sued “to recover damages on an unliquidated claim. Defendants have neither been held liable or assessed damages.”
Moreover, there is “a longstanding presumption against the retroactive application of statutes.” While the General Assembly has authorized the comptroller to define “accounts receivable,” it has not authorized the comptroller to apply a definition retroactively “to the parties affected thereby.”
In this case, the comptroller amended the definition after suit was filed, declared the amendment to be retroactive, then relied on the amendment to establish “standing to bring this action. The self-serving nature of this promulgation almost disqualifies the Comptroller for the glaring conflict of interest it presents.”
The demurrers to the complaint for lack of standing are sustained with prejudice.
Commonwealth ex rel. Von Moll v. HKS Inc., et al. CL17-4381, April 23, 2019; Richmond Cir. Ct. (Jenkins). VLW 019-8-092, 9 pp.
