RICHMOND METRO. v. McDevitt Street Bovis

• Decision Date: 06 November 1998
• Docket Number: Record No. 980081.
• Citation: 507 S.E.2d 344,256 Va. 553
• Parties: RICHMOND METROPOLITAN AUTHORITY v. McDEVITT STREET BOVIS, INC.
• Court: Virginia Supreme Court

507 S.E.2d 344

256 Va. 553

RICHMOND METROPOLITAN AUTHORITY v. McDEVITT STREET BOVIS, INC.

Record No. 980081.

Supreme Court of Virginia.

November 6, 1998.

Carl F. Bowmer (Christian & Barton, on briefs), Richmond, for appellant.

William R. Mauck, Jr. (Samuel W. Hixon, III; Williams, Mullen, Christian & Dobbins, on brief), Richmond, for appellee.

Amicus Curiae: The Associated General Contractors of Virginia, Inc. (William L. Thurston; Beale, Balfour, Davidson & Etherington, Richmond, on brief), in support of appellee.

Present: All the Justices.

KINSER, Justice.

This appeal involves claims for actual and constructive fraud arising out of a construction contract. Because any duty breached in this case exists solely by reason of the contract between the parties, we will affirm the judgment of the circuit court dismissing the causes of action for fraud.

I.

On August 31, 1984, Richmond Metropolitan Authority (RMA) entered into an "Agreement for Design-Build Construction, New Parker Field Stadium" (Design-Build Contract) with McDevitt Street Bovis, Inc., (McDevitt) for construction of the Diamond Baseball Stadium (the Diamond) in Richmond. The Diamond's design criteria included 32 pre-cast/post-tensioned concrete structural members known as "bents" for its cantilevered roof and upper concourse seating. Each bent was to have had hollow conduits containing steel tendons/bars. After insertion and tensioning of the steel tendons/bars, the design criteria required the injection of grout into each conduit. The grout was to be injected through protruding grout tubes. When the grout had set, the tubes were to be cut off flush with the surface of the bents and sealed. The purpose of the grout was to strengthen the bents, prevent corrosion of the steel tendons/bars, and enhance the structural integrity of the Diamond.

McDevitt built the Diamond during the winter of 1984-1985. In order to receive progress payments during the construction, McDevitt submitted "APPLICATION AND CERTIFICATE FOR PAYMENT" forms to RMA. Each such application contained a sworn statement by McDevitt that "[t]he undersigned Contractor certifies that to the best of the Contractor's knowledge, information and belief the Work covered by this Application for Payment has been completed in accordance with the Contract Documents ...." McDevitt presented other documents to RMA, including "as-built" drawings, an Application for Final Payment, and an Affidavit of Payment and Certificate of Substantial Completion, in which McDevitt represented that it had constructed the Diamond in accordance with the design criteria set forth in the Design-Build Contract.

Around February 1996, RMA discovered that many of the conduits contained no grout or insufficient grout and that, as a result, the steel tendons/bars in the conduits had corroded. According to RMA, McDevitt had sealed the empty tube openings with grout, thus giving the false impression that the conduits were filled with grout. RMA also learned that three conduits contained no steel tendons/bars. As a result of McDevitt's failure to construct the Diamond in accordance with the design criteria, RMA claims that the Diamond fails to meet applicable building code requirements and that the durability and strength of the structure are impaired.

On February 10, 1997, RMA filed suit against McDevitt.¹ In its motion for judgment, RMA alleged that McDevitt breached the Design-Build Contract (Count I) and committed actual and constructive fraud (Counts II and III, respectively). RMA based its allegations of fraud on McDevitt's misrepresentations in the construction documents submitted to RMA and on McDevitt's physical concealment of its noncompliance with the design criteria.

McDevitt filed a plea in bar asserting that the statute of limitations contained in Code § 8.01-246(2)² bars Count I and that the statute of repose, Code § 8.01-250,³ precludes all three counts. On May 6, 1997, the circuit court sustained McDevitt's plea as to Count I of the motion for judgment and dismissed it. The court, however, overruled the plea in bar as to Counts II and III.

Thereafter, McDevitt moved for summary judgment on RMA's claims for actual and constructive fraud.⁴ On October 27, 1997, the court entered an order sustaining the motion and granting judgment for McDevitt. In a letter opinion, the court explained that "[t]he particular instances of misrepresentation are duties and obligations specifically required by the contract," and that nothing "establishes that the duty breached is separate and independent from the contract." The court further stated:

McDevitt promised to inject the grout, promised to submit accurate certificates for progress payments, promised to submit an accurate certificate of final completion and "as built" drawings, and promised to fill the grout tubes before cutting them off and sealing the tubes. McDevitt's failure to perform each and every one of these promises was a breach of its contract, not fraud....

RMA appeals the circuit court's judgment with regard to Counts II and III.⁵ McDevitt assigns cross-error to the circuit court's ruling that Counts II and III are not time-barred by Code § 8.01-250.

II.

RMA asserts that McDevitt's misrepresentations that the Diamond was constructed in accordance with the criteria in the Design-Build Contract and its physical concealment of its noncompliance with the design criteria give rise to common law actions for constructive and actual fraud. Conceding that mere failure to inject grout into the conduits would constitute only a breach of contract, RMA asserts that McDevitt's false applications under oath to induce payments and its sealing the empty tube openings with grout are separate and independent wrongs that go beyond McDevitt's contractual duties. We do not agree.

A plaintiff asserting a cause of action for actual fraud bears the burden of proving by clear and convincing evidence the following elements: "(1) a false representation, (2) of a material fact, (3) made intentionally and knowingly, (4) with intent to mislead, (5) reliance by the party misled, and (6) resulting damage to the party misled." Evaluation Research Corp. v. Alequin, 247 Va. 143, 148, 439 S.E.2d 387, 390 (1994) (citing Bryant v. Peckinpaugh, 241 Va. 172, 175, 400 S.E.2d 201, 203 (1991)). Constructive fraud requires proof, also by clear and convincing evidence, "that a false representation of a material fact was made innocently or negligently, and the injured party was damaged as a result of ... reliance upon the misrepresentation." Mortarino v. Consultant Eng'g Serv., 251 Va. 289, 295, 467 S.E.2d 778, 782 (1996) (citing Alequin, 247 Va. at 148,439 S.E.2d at 390).

In determining whether a cause of action sounds in contract or tort, the source of the duty violated must be ascertained. In Oleyar v. Kerr, Trustee, 217 Va. 88, 90, 225 S.E.2d 398, 399-400 (1976) (quoting Burks Pleading and Practice § 234 at 406 (4th ed.1952)), we distinguished between actions for tort and contract:

If the cause of complaint be for an act of omission or non-feasance which, without proof of a contract to do what was left undone, would not give rise to any cause of action (because no duty apart from contract to do what is complained of exists) then the action is founded upon contract, and not upon tort. If, on the other hand, the relation of the plaintiff and the defendants be such that a duty arises from that relationship, irrespective of the contract, to take due care, and the defendants are negligent, then the action is one of tort.

We have acknowledged that a party can, in certain circumstances, show both a breach of contract and a tortious breach of duty. Foreign Mission Bd. v. Wade, 242 Va. 234, 241, 409 S.E.2d 144, 148 (1991). However, "the duty tortiously or negligently breached must be a common law duty, not one existing between the parties solely by virtue of the contract." Id. (citing ...