McMillion v. Dryvit Systems, Inc.
| Decision Date | 14 September 2001 |
| Docket Number | Record No. 002802. |
| Citation | 552 S.E.2d 364,262 Va. 463 |
| Parties | Charles McMILLION, et al., v. DRYVIT SYSTEMS, INC. |
| Court | Virginia Supreme Court |
Robert K. Richardson (Odin, Feldman & Pittleman, on briefs), Fairfax, for appellants.
(Eric W. Schwartz; George H. Bowles; Troutman Sanders Mays & Valentine, on brief), Norfolk, for appellee.
Present: All the Justices.
OPINION BY JUSTICE CYNTHIA D. KINSER.
This appeal involves claims of false advertising and fraud arising out of an allegedly defective product known as "Exterior Insulation Finish System" (EIFS). Because we conclude that the limitation period in Code § 8.01-248 applies to a cause of action for false advertising, we will affirm the circuit court's judgment sustaining a plea of the statute of limitations. We will also affirm the court's judgment sustaining a demurrer to the fraud counts for two reasons. In a pleading filed after the court sustained a demurrer, the plaintiffs did not re-plead fraud based on the defendant's failure to disclose known defects in its product to the public. As to fraud based on the defendant's affirmative misrepresentations, the plaintiffs did not allege misrepresentations of existing facts.
The circuit court decided this case upon a plea of the statute of limitations and a demurrer without an evidentiary hearing. Thus, we will summarize the facts as alleged in the pleadings. Eagles Court Condo. Unit Owners Ass'n v. Heatilator, Inc., 239 Va. 325, 327, 389 S.E.2d 304, 304 (1990). In doing so, we consider the facts stated and all those reasonably and fairly implied in the light most favorable to the nonmoving parties, Charles McMillion and Suzanne McMillion. Yuzefovsky v. St. John's Wood Apartments, 261 Va. 97, 102, 540 S.E.2d 134, 137 (2001).
The McMillions commenced building a house in 1993. During the construction, they contacted a contractor who was familiar with and installed a style of stucco exterior finish that the McMillions wished to use on their house. That contractor advised the McMillions that the finish about which they were inquiring was a synthetic stucco product known as EIFS. The contractor then gave the McMillions some advertising brochures and other promotional materials issued by Dryvit Systems, Inc. (Dryvit), a manufacturer of EIFS. Those brochures contained a variety of information and representations about the product and its characteristics. The McMillions subsequently selected the EIFS manufactured by Dryvit for use on their home. The house was completed in September 1993.
Five years later, in September 1998, the McMillions allowed a television news crew who was preparing a story about EIFS to inspect their home. The inspection revealed that water had become trapped behind the EIFS, causing rotting and deterioration of the house's structure, mold growth, and insect infestations. These problems were not visible on the exterior of the McMillions' house.
According to the McMillions' averments, EIFS is a defective product. EIFS is supposed to provide a waterproof exterior surface. However, some water allegedly intruded behind the exterior surface on the McMillions' house and could not drain out or evaporate because of the design of the EIFS. The McMillions contend that this trapped moisture permeated and damaged the porous structural elements of their home to the extent that the house could not be repaired without removing the EIFS, repairing the structural damage, and replacing the EIFS with an alternative exterior finish.
Because of the damage to their home, the McMillions filed an action against Dryvit and seven other defendants on September 22, 1998, seeking, among other damages, the costs of having their home repaired.1 As pertinent to this appeal, the McMillions asserted against Dryvit, in both their first and second amended motions for judgment, claims of false advertising pursuant to Code §§ 59.1-68.3 and 18.2-216, and actual and constructive fraud.2 In the fraud counts, the McMillions alleged, among other things, that Dryvit knew or should have known of inherent defects in the EIFS and its incompatibility with certain other products; that Dryvit should have disclosed such defects to the McMillions; that, by failing to make such disclosures, Dryvit misrepresented material facts to the McMillions; and that they relied upon such misrepresentations to their detriment. In response to the second amended motion for judgment, Dryvit filed a plea of the statute of limitations and a demurrer.
After considering the parties' briefs and hearing argument, the circuit court sustained the plea of the statute of limitations as to the count alleging false advertising. The court determined that the limitation period prescribed in Code § 8.01-248 applies to a claim for false advertising. The court also sustained the demurrer to the counts for actual and constructive fraud on the basis that the McMillions had failed to plead those counts with sufficient particularity, but granted leave to amend those claims.
Subsequently, the McMillions filed a third amended motion for judgment, asserting claims of actual and constructive fraud against Dryvit. In that pleading, they did not allege that Dryvit failed to disclose defects in its EIFS. Instead, the McMillions asserted only that Dryvit made certain affirmative, material misrepresentations about its product upon which the McMillions relied to their detriment.
As before, Dryvit filed a demurrer and a plea of the statute of limitations in response to the third amended motion for judgment. The circuit court sustained the demurrer and dismissed the action with prejudice as to Dryvit.
The McMillions filed eight assignments of error. However, the following three questions are dispositive of this appeal: (1) whether the limitation period prescribed in Code § 8.01-248 applies to a claim for false advertising; (2) whether this Court can address the merits of the fraud counts based on Dryvit's alleged failure to disclose defects in its product; and (3) whether the McMillions pled misrepresentations of existing facts, rather than mere opinions as to future events, in their fraud counts based on affirmative misrepresentations.
The McMillions claim that the circuit court erred in determining that the statute of limitations applicable to a cause of action for false advertising is the "catch-all" limitation period set forth in Code § 8.01-248, rather than the limitation period and accrual date for fraud found in Code §§ 8.01-243(A) and 8.01-249(1), respectively. Today, this Court holds in Parker-Smith v. Sto Corp., 262 Va. 432, 437, 551 S.E.2d 615, 618 (2001), that a cause of action for false advertising, brought pursuant to Code §§ 59.1-68.3 and 18.2-216, is subject to the limitation period prescribed in Code § 8.01-248.3 Thus, the circuit court did not err in sustaining Dryvit's plea of the statute of limitations with regard to the McMillions' claim for false advertising.4
The McMillions argue that the circuit court erred as a matter of law in determining that a manufacturer with superior knowledge of inherent defects in its product and the reasonably foreseeable damage resulting from those defects has no duty to disclose such information to the consuming public. Because the McMillions did not re-plead fraud based on a failure to disclose in the third amended motion for judgment, we cannot reach the merits of this issue.
In the second amended motion for judgment, the McMillions based their fraud counts on both Dryvit's failure to disclose and its affirmative misrepresentations. However, they did not include allegations concerning Dryvit's failure to disclose product defects in the third amended motion for judgment, nor were such allegations incorporated by reference to any prior pleadings. Instead, the fraud counts in the third amended motion for judgment addressed only affirmative misrepresentations contained in Dryvit's advertising brochures.5
On brief, the McMillions state that the circuit court's order sustaining Dryvit's demurrer to the second amended motion for judgment did not specify which form of fraud the court was addressing, but that Dryvit and the McMillions understood that the court dismissed with prejudice the "failure to disclose" form of fraud and did not allow that kind of fraud to be re-pled in the third amended motion for judgment. Dryvit took the same position in a memorandum that it filed in support of its demurrer to the third amended motion for judgment. In that memorandum, Dryvit stated that the circuit court sustained with prejudice Dryvit's demurrer to the McMillions' allegations of fraud based on nondisclosure in the second amended motion for judgment and that the McMillions consequently deleted such allegations in their third amended motion for judgment. A copy of one page from a transcript of a hearing held in the circuit court on October 26, 1999, which Dryvit attached to its memorandum, reflects that the circuit court agreed with a suggestion by Dryvit's counsel that the McMillions be granted leave to file a third amended motion for judgment only with regard to affirmative misrepresentations allegedly made by Dryvit.6
However, despite what the parties may have understood to be the court's ruling, the circuit court's order sustaining Dryvit's demurrer to the second amended motion for judgment did not limit the kind of fraud that the McMillions could re-plead in the third amended motion for judgment. The court specifically stated the following in its order:7
Dryvit's demurrers to Counts VI and VII of the Plaintiffs' Second Amended Motion for Judgment, alleging Dryvit's actual and constructive fraud, are SUSTAINED, as plaintiffs failed to plead those counts with the required particularity.... Plaintiffs are granted leave to file amended claims for actual and constructive fraud.
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