Construction Law Insights

Kerlavage v. America’s Home Place, Inc., 2019 Va. Cir. LEXIS 39 (Spotsylvania Cnty. Cir. Ct. Mar. 11, 2019)

Jeffrey Kerlavage (“Kerlavage”) contracted with America’s Home Place, Inc. (“AHP”) to build a home. Construction began in October of 2014. AHP hired Indoor Comfort Experts, LLC (“ICE”) to install an HVAC system, Builder Services Group, Inc. dba Cary Quality’s (“Cary Quality”) to install a vapor barrier in the crawl space, Vangorder Contracting, LLC (“Vangorder”) for the carpentry, Brandonbilt Engineering, P.C. (“Brandonbilt”) to waterproof the home and lay a foundation drain in the crawlspace, and PermaTreat Pest Control Company (“PermaTreat”) to remediate mold in the home. Kerlavage alleged that AHP and its subcontractors failed to properly perform their respective responsibilities and negligently created an unsafe condition in the home, which resulted in personal injuries, physical and emotional pain and suffering, medical expenses, and expenses related to repairing defects and mold remediation.

Gateway Residences at Exch., LLC v. Ill. Union Ins. Co., 2019 U.S. App. LEXIS 6044 (4th Cir. Feb. 28, 2019)

Gateway Residences at Exchange, LLC (“Gateway”) hired Mechanical Design Group (“MDG”) to provide various engineering and construction services, including installing two life safety power generators in the garage of an apartment complex. MDG did not install the generators properly and, when the generators were started, they caught on fire, wrecking the generators and delaying the opening of the apartment complex. Gateway demanded that MDG cure the negligent design and installation of the generators. In September of 2014, MDG went out of business. Before starting work on the Gateway project, MDG bought liability insurance from the Illinois Union Insurance Company (“IUIC”) that only covered claims made against the insured and reported to the insurer during the policy period, which was February 1, 2014 through February 1, 2015. MDG never informed IUIC about Gateway’s potential claim before its insurance policy expired. IUIC first

Brush Arbor Home Constr. v. Alexander, 823 S.E.2d 249 (Va. Feb. 21, 2019)

Andrea and Mark Alexander (the “Alexanders”) sued Brush Arbor Home Construction, LLC (“Brush Arbor”), alleging that the home constructed by Brush Arbor for the Alexanders’ suffered from a variety of defects that caused the home to sustain water damage. Article 12 of the parties’ contract contained the following arbitration clause: “Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled by arbitration administered by the Better Business Bureau under its Construction Industry Arbitration Rules, and judgment on the award by the arbitrator(s) may be entered in any court having jurisdiction thereof.” Brush Arbor filed a motion to compel arbitration. The circuit court denied Brush Arbor’s motion because “the Better Business Bureau does not have any construction industry arbitration rules” and, therefore, it would be “impossible to execute the term of the agreement.”

ACA Fin. Guar. Corp. v. City of Buena Vista, 917 F.3d 206 (4th Cir. 2019)

In 2002, the Commonwealth of Virginia created the Public Recreational Facilities Authority (the “Authority”) to construct, operate, and maintain public recreational facilities for the City of Buena Vista (the “City”). In 2003 the Authority, at the City’s request, took out a loan to finance the construction of a municipal golf course called the Vista Links Golf Club (the “Golf Course”). In 2005, the City and Authority sought to refinance the Golf Course loan and issued over $9 million in bonds. The Authority and SunTrust Bank (the “Bank”) entered into a Trust Agreement, which described how the bonds would be issued and repaid. To repay the bonds, the Authority leased the Golf Course to the City and the rent payments were used to repay the bonds, but the City’s obligation to make rent payments was subject to its decision to appropriate funds each year. The City issued a Deed of Trust to the Bank pledging the existing City Hall building and police station as security and another Deed of Trust pledging the Golf Course as security (collectively, the “Deeds of Trust”). The Bank retained ACA Financial Guaranty Corporation (“ACA”) to provide insurance on the bonds.

Sherman v. South Grading, Inc., 2019 Va. Cir. LEXIS 10 (City of Chesapeake Cir. Ct. Jan. 28, 2019)

Heather Sherman (“Sherman”), judgment creditor/garnishor, obtained a judgment against Southern Grading, Inc. (“SGI”), judgment debtor. Sherman caused the court to issue a summons in garnishment on November 21, 2017. Sherman then served the garnishment summons on Virtexco Corporation (“Virtexco”) on November 30, 2017. Virtexco filed a garnishment answer that stated that it held no funds owed to SGI. Sherman disagreed and asked the court to determine Virtexco’s potential liability. A garnishment proceeding is a separate proceeding in which the judgment creditor enforces the lien of his execution against property or contractual rights of the judgment debtor which are in the hands of a third person, the garnishee. The judgment creditor stands on no higher ground than the judgment debtor and can have no rights greater than the judgment debtor possess. Raley v. Haider, 286 Va. 164, 170 (2013). Upon service the summons on the garnishee, the debts already due to the judgment debtor when the summons in garnishment is served upon the garnishee and any indebtedness of the garnishee to the garnishee to the judgment debtor which arises between the date of service of such summons on the garnishee and the return date of the summons is subject to garnishment.

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