This requirement is more stringent than the statute of frauds requirement in Code Sec. 11-2(6), a contract not in writing in violation of Code Sec. 22-150 being ultra vires and void ab initio. 3. The doctrine of estoppel cannot be imposed against a governmental entity when the contract is ultra vires and void. Deal v. Commonwealth, 224 Va. 618, 299 S.E.2d 346 (1983), followed. Appeal from a judgment of the Circuit Court of Amherst County. Hon. Norman K. Moon, judge presiding.
The question before the court is whether the School Board possesses the authority under the laws of the Commonwealth of Virginia to agree to arbitrate contractual disputes, for if it does not, then any such agreement by the Board is unenforceable as ultra vires and the motion to compel arbitration therefore must be denied. See Richmond Ry. Co. v. Richmond, Etc., 145 Va. 266, 299, 133 S.E. 888, 898 (1926) ("When the contract is once declared ultra vires, the fact that it is executed does not validate it, nor can it be ratified so as to make it the basis of suit or action, nor does the doctrine of estoppel apply."); accord Richard L. Deal Assocs., Inc. v. Commonwealth, 224 Va. 618, 299 S.E.2d 346 (1983). The resolution of this question depends in turn upon application of the Dillon Rule, a rule of construction applicable in Virginia when determining the powers of local government: "There can be no question that Virginia long has followed, and still adheres to, the Dillon Rule of strict construction concerning the powers of local governing bodies."
However, we have cautioned in several cases that those who deal with public officials must, at their peril, take cognizance of their power and its limits. Deal v. Commonwealth, 224 Va. 618, 623, 299 S.E.2d 346, 349 (1983); S. H. Apts. v. Elizabeth City Co., 185 Va. 67, 78-79, 37 S.E.2d 841, 846 (1946). The rule of caution repeated above is the outgrowth of competing and conflicting demands.
"[T]he sovereign is a person or party within the intendment of a statute only when the General Assembly names it expressly or by necessary implication." Cuccinelli, 283 Va. at 428 (emphasis added) (quoting Richard L. Deal & Associates, Inc. v. Commonwealth, 224 Va. 618, 620 (1983)). As noted above, "[o]nly the General Assembly, acting in its capacity of making social policy
Miron does not suggest, however, how a case involving the authority of a city — an entity not partaking of sovereign immunity — might be persuasive on whether the state has waived its sovereign immunity or expressly consented or subjected itself to arbitration and suit by granting one of its agencies the power to make contracts. In Richard L. Deal and Associates, Inc. v. Commonwealth, 299 S.E.2d 346 (Va. 1983), the Virginia Supreme Court reached a similar conclusion on similar facts. Deal sued to enforce an arbitration award, after the Commonwealth refused to pay for services it had contracted for.
In other contexts, Virginia courts have held that statutes applying to "persons" but that fail to expressly name the sovereign do not apply to the Commonwealth. See, e.g., Cuccinelli v. Rector & Visitors of the Univ. of Va., 283 Va. 420, 722 S.E.2d 626 (2012) (holding that the Commonwealth is not a "person" under the Fraud Against Taxpayers Act); Richard L. Deal & Assocs. v. Commonwealth, 224 Va. 618, 299 S.E.2d 346 (1983) (holding that the Commonwealth is not a "person" contemplated for arbitration statutes); Pross, 225 Va. 492, 303 S.E.2d 887 (1983) (holding that the Commonwealth is not a "person" subject to the statute of limitations). In one case the Court expressly held that a previous version of this definitional section, Va. Code § 1-13.19, repealed by 2005 Acts of Assembly, ch. 839. which stated that the word person "may extend and be applied to bodies politic," failed to expressly name the sovereign such that a cause of action could be brought against the Commonwealth.
She contends that violations of the 2005 Operating Agreement only rendered the transaction voidable, which would allow her to raise equitable defenses such as estoppel. See Richard L. Deal & Assoc., Inc. v. Commonwealth, 299 S.E.2d 346, 349 (Va. 1983). In particular, she argues that an operating agreement is merely an agreement among its members, and that just as the Debtors could be estopped from denying they had the power to consummate the 2009 Sale, so too can the Trustee.
One obvious alternative rationale for the Angle court's decision is estoppel. See, e.g., Employers Commercial Union Ins. Co. v. Great Am. Ins. Co., 214 Va. 410, 200 S.E.2d 560 (1973); Thrasher v. Thrasher, 210 Va. 624, 172 S.E.2d 771 (1970); Covington Virginian v. Woods, 182 Va. 538, 29 S.E.2d 406 (1944); cf. Richard L. Deal Assoc. v. Commonwealth, 224 Va. 618, 299 S.E.2d 346 (1983) (state not estopped to deny arbitration ruling where state agents had no authority to agree to arbitration of claim). IV
Numerous other cases so hold. SeeThomas v. City of Richmond , 79 U.S. 349, 357, 12 Wall. 349, 20 L.Ed. 453 (1870) ; King George Cty. Serv. Auth. v. Presidential Serv. Co. Tier II , 267 Va. 448, 456, 593 S.E.2d 241 (Va. 2004) ("Anyone dealing with an officer or employee of a public body must ascertain the extent and nature of that person's authority."); York Cty. v. King's Villa, Inc. , 226 Va. 447, 450, 309 S.E.2d 332 (Va. 1983) ; Richard L. Deal & Assocs., Inc. v. Virginia , 224 Va. 618, 623, 299 S.E.2d 346 (Va. 1983). Count 7, then, will be dismissed.
A contract that is ultra vires is void ab initio and has no legal effect. Richard L. Deal & Assocs., Inc. v. Commonwealth, 299 S.E.2d 346, 348 (Va. 1983). "[N]o performance by either party thereto can give the unlawful contract validity or serve as the basis of any right of action upon it and the doctrine of estoppel has no application."