Construction Law Insights

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.

The court agreed with Virtexco’s answer to the garnishment summons. Virtexco made no payments to SGI after November 30, 2017. Virtexco’s contract with SGI allowed Virtexco to withhold payment due to SGI and that Virtexco could pay SGI’s subcontractors. Had SGI sued Virtexco under the contract for payment due between November 30, 2017 and February 6, 2018, SGI would have not recovered anything because SGI was in breach of the contract, had not fully performed its work, and still owed its subcontractors for work.

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