As a certain horror writer often says — welcome back constant reader — this time to a story where opposing counsel tries to  take advantage of a somewhat obscure code section that you need to be aware of if you are settling condemnation matters in Virgina. (However, unlike horror stories, this one has a happy ending for the condemning authority.)

Factual Background

On December 21, 2020, the Commissioner filed a certificate of take and deposited $269,179 with the Fairfax County Circuit Court, representing the estimated just compensation for the property, in order to acquire a portion of the property located at 496 Elden Street, owned by 496 Elden Street, LLC.  The trial was initially scheduled for November 14, 2022.

The Court’s opinion states the facts as follows (which as we all know, in any given case may not be exactly what happened as far as the counsel who were involved in it may view it, but regardless, the opinion states as follows) :

In the months before trial was set to commence, the parties exchanged email communications to explore a potential settlement. In an email dated September 30, 2022, the Commissioner told Elden that “[a]s to the [fair market value]: I have approval for settlement at $322,000, with the ‘final’ date of settlement being the date the final order is entered with the court.” The Commissioner also stated that it would prepare an “Agreement After Certificate” (“AAC”) to be signed by both parties to finalize the proposed settlement. On October 20, 2022, the Commissioner emailed the AAC to Elden, and Elden’s counsel replied that the AAC “[l]ooks fine substantively” except for a “couple of typos” and that he would “work on getting it signed.” The Commissioner replied that the typo fixes were “fine.”

On October 24, 2022, Elden’s counsel sent an email to the Commissioner with an attached letter signed by an agent from John Marshall Bank stating that the bank was waiving its rights under the deed of trust’s condemnation clause to the $322,000 settlement amount. In the email, Elden’s counsel stated that “[o]n the AAC, I forgot to include language having the compensation paid directly to owner/counsel since there are now no liens with the condemnation clause waiver. My apologies. See attached edit.” The Commissioner replied that “[t]he AAC cannot be modified to pay the funds directly to the landowner” and that “[i]n order for indefeasible title to be granted by the court, the funds must pass through the court pursuant to Virginia law (Va. Code Section 25.1-317 and 33.2-1027).” At this point, negotiations came to an impasse, with Elden maintaining its belief that a binding settlement had been reached on just compensation, and the Commissioner maintaining its belief that the parties did not reach a binding settlement because the AAC had not been signed. The parties never signed the AAC.

On October 28, 2022, Elden filed a motion requesting the circuit court to enforce the purported settlement and to order the Commissioner to pay the settlement amount, as well as fees and costs, directly to Elden, pursuant to Code § 25.1-247.1. In an opinion letter dated December 29, 2022, the circuit court found that the parties’ email exchanges constituted a binding settlement on just compensation and that, under Code § 25.1-247.1, the Commissioner had to pay the settlement amount directly to Elden or Elden’s counsel. The Commissioner filed a motion for reconsideration, and Elden filed a motion seeking an award of attorney fees and interest under the 2022 amendments to Code § 25.1-247.1 and a motion to bifurcate its lost profits claim under Code § 25.1-230.1(F).

On March 31, 2023, the circuit court entered a final order requiring the Commissioner to pay just compensation directly to Elden’s counsel, granting the Commissioner indefeasible title to the Property, denying the Commissioner’s motion for reconsideration, and denying Elden’s request for attorney fees and interest. The circuit court also granted Elden’s request to bifurcate its lost profits claim from the rest of the proceedings and ordered that Elden “shall file a separate action to pursue its lost profits claim” against the Commissioner. These consolidated appeals followed.

Where the opinion says “the Commissioner,” reading between the lines we can read that that actually means the attorney for the Commissioner of Highways. The gist here, if the above is too long, reading between the lines further, is that counsel for the Commissioner seems to have had what amounted to an informal understanding with opposing counsel to finish the case, subject to client final approval and formalizing the settlement via a formal settlement agreement. That part is all completely normal, until counsel for the landowner tried to take things off of the rails by inserting a change to have the money paid directly  to counsel, and when they could not get their way, then tried to claim the case was already settled without a settlement agreement, so that they could use a somewhat obscure code section to get the court to pay their attorney’s fees.

The key code section here is Va. Code 25.1-247.1, and if you are doing condemnation cases in Virginia, it is important to remember the language stuck into the end of this somewhat obscure code section. When initially inserted into the code in 2018, this oddly written piece of code largely seemed to operate to allow funds to be paid directly to the landowner, with the consent of the owner. However, in 2022 the bold language below was added:

Notwithstanding any other provision of this chapter, upon any settlement or final determination resulting in a judgment for the owner, whether funds have been paid into the court or are outstanding, all such funds due and owing shall be payable to the owner or, if the owner consents, to the owner’s attorney within 30 days of the settlement or final determination, unless otherwise subject to § 25.1-240, 25.1-241, 25.1-243, or 25.1-250. Nothing in this section shall be construed to alter the priority of liens or any obligation to satisfy or release any outstanding liens on the property or the funds.The failure to pay these sums within 30 days to the property owner, as specified herein, shall result in an award of attorney fees and interest at the judgment rate from the date the funds became due and owing. The provisions of this section and its remedies shall apply to any condemnation action whether such action arises under this title or under Title 33.2.

Analysis

The language in bold above puts some teeth into the thirty day requirement in the earlier language, so that now there is arguably a thirty day time limit from the settlement to the payment of the funds, but that then makes one ask payment of the funds to whom, and what exactly counts as a settlement in a condemnation case. Most counsel would expect that the settlement has not occurred at least until the ink is dry on the settlement agreement or agreement after certificate, or arguably even later than that, given in condemnation cases there has to be a court order confirming title after the agreement is executed. It is very helpful, in case your opposing counsel wants to behave like the one in this case, to make clear in your e-mail communications that any settlement discusisons are subject to final client approval and signature by the client of a settlement agreement or agreement after certificate, to head off them claiming that a settlement has already been reached.

The standard practice in Virginia in these sorts of cases is that the funds are paid into the court, and then the court deals with distributing them to the landowner or creditors. Opposing counsel tries to argue in this case that Va. Code 25.1-247.1 does not allow payment of the funds into court. However, the landowner and the condemning authority can agree to modify condemnation procedures, so even if opposing counsel were correct in his argument (which it does not seem like he is) including a specific provision in the settlement agreement allowing payment into court takes care of that argument upon execution of the settlement agreement. Furthermore, there is usually language in a properly drawn Agreement After Certificate, which specifies that the funds are deemed to have been paid to the landowner under upon payment of the funds into court, to head off any different interpretation of this code section.

Court of Appeals Decision

On January 21, 2025, the Virginia Court of Appeals issued an unpublished opinion in the case of Commissioner of Highways v. 496 Elden Street, LLC, addressing disputes arising from a condemnation proceeding related to a road-widening project in Herndon, Virginia.

The Court of Appeals reversed the circuit court’s judgment, stating 

“When an agreement is sought to be established by means of letters, such letters will not constitute an agreement, unless the answer be a simple acceptance of the proposal without the introduction of any new term.” Id. (quoting Va. Hot Springs Co. v. Harrison, 93 Va. 569, 576, 25 S.E. 888 (1896)). “The assent must comprehend the whole of the proposition; it must be exactly equal to its extent and provisions, and it must not qualify them by any new matter.” Harrison, 93 Va. at 576 (quoting 1 Parsons on Contracts 476 (6th ed.)). “A contract cannot exist if the parties never mutually assented to terms proposed by either as essential to an accord.” Valjar, 220 Va. at 1018.

Applying these bedrock contract-formation principles, we hold that the circuit court erred in finding that the Commissioner and Elden reached a binding settlement on just compensation. Despite their initial email communications agreeing as to the amount of just compensation, the parties here clearly intended to culminate their settlement with a complete, written, signed contract—the AAC—which was ultimately never signed or agreed to by the parties. And “where parties intend to culminate their agreement with a signed contract, there is a strong presumption that no contract exists until a contract is formally signed and in writing.” Moorman, 276 Va. at 76. This strong presumption under Virginia law cannot be overcome here.

Elden contends that the parties’ email communications constituted a binding settlement agreement because the only term that was material to the parties’ settlement was the amount of just compensation, and nothing else. But despite Elden’s assertions to the contrary, the Commissioner’s  provision in the AAC as to the method of payment was also a material aspect of the settlement agreement. See Material, Black’s Law Dictionary (12th ed. 2024) (“Of such a nature that knowledge of the item would affect a person’s decision-making; significant; essential.”). Even if we assumed that, under Code § 25.1-247.1,4 the Commissioner could not lawfully insert a provision in the AAC that the just-compensation funds would be deposited with the circuit court (rather than paid directly to Elden), that provision was nevertheless still material to the settlement because any legal error by the Commissioner as to this provision would have significantly affected the Commissioner’s decision whether to enter into a settlement with Elden in the first place. Under these circumstances, it cannot truly be said that “the minds of the parties have met on every material phase of the alleged agreement.” Chittum, 216 Va. at 467. Therefore, the parties did not reach a binding settlement.

Since we hold that the parties did not reach a binding settlement on just compensation, we further hold that the remaining assignments of error in these consolidated appeals are not yet ripe for appellate review.

Conclusion

While there is no indication that counsel for the Commissioner did anything wrong here whatsoever, some potential takeaways from this case include the following:

1)     Know what Va. Code § 25.1-247.1 says and keep it’s timing requirements in mind; condemning authority counseil will want to make sure that any “settlement” does not occur until they are in a position to be able to pay the funds within the applicable timing requirement for the case;

2)    Making clear in e-mail communications that any settlement discusisons are subject to final client approval and/or signature by the client of a settlement agreement or agreement after certificate may help head off any claim like in this case that settlement has somehow already occurred in advance of the execution of the settlement agreement; and

3)    It is helpful to craft the settlement agreement or agreement after certificate to address Va. Code § 25.1-247.1 and specify that the funds are deemed to have been paid to the landowner when they are deposited into court.

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Ross Greene, CRE, SR/WA is a firm shareholder and chair of the firm’s Eminent Domain / Right of Way Practice Group. He focuses his practice in the areas of eminent domain, real estate, wills, trusts, estates, and business matters.