PRESENT: Koontz, Kinser, Lemons, Goodwyn, Millette, and Mims,
JJ., and Carrico, S.J.
STATION #2, LLC
OPINION BY
v. Record No. 091410 JUSTICE WILLIAM C. MIMS
June 10, 2010
MICHAEL LYNCH, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK
Junius P. Fulton, III, Judge
In this appeal, we consider whether an oral agreement to
allow Station #2, LLC (“Station #2”) to install soundproofing
material in a void space between the ceiling of premises leased
by it and the floor of premises owned by another was made
unenforceable by the statute of frauds. We also consider
claims of fraudulent inducement to contract and statutory
conspiracy.
I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW
The circuit court decided this case on demurrers and a
special plea in bar. When an issue is decided by the circuit
court on demurrer, we accept as true the facts alleged by the
plaintiff, who is entitled to the benefit of all reasonable
inferences that may be drawn from them. Hamlet v. Hayes, 273
Va. 437, 439, 641 S.E.2d 115, 116 (2007). We also accept the
plaintiff’s allegations as true when the circuit court takes no
evidence on a plea in bar. Gray v. Virginia Sec’y of Transp.,
276 Va. 93, 97, 662 S.E.2d 66, 68 (2008). Accordingly, we draw
our facts here from the allegations made by Station #2 as the
plaintiff below.
Michael and Lisa Lynch owned a three-story building at 233
Granby Street in the City of Norfolk. They conveyed the second
and third stories to 237 Granby LLC (“237 Granby”), which
intended to renovate and sell them as condominiums. In
December 2004 the Lynches leased the first story to Station #2,
which intended to operate a restaurant offering music and live
entertainment. The lease provided that:
Tenant will insure that in conjunction with the
construction of the condominiums located above
the business that additional soundproofing
material to be selected by the Tenant with
professional sound engineering consultants will
be installed between the ceiling of the Premises
and the floor of the lower level of the
condominiums located above the business. Tenant
will use reasonable efforts to work in
conjunction with the builder of the condominiums
with regard to soundproofing. . . . The
[material] is to be of sufficient sound abatement
characteristic as to effectively minimize noise
and vibration from the leased premises being
transmitted to the condominiums and to meet
Landlord’s covenant of quiet enjoyment passing to
the owner of the condominiums.
Prior to executing the lease, members of Station #2
retained a sound attenuation expert and met with Michael Lynch,
Frank T. Gadams, and representatives of Hourigan Construction
Corp. (“Hourigan”) to discuss installation of the soundproofing
material. Gadams was a principal of Marathon Development
Group, Inc. (“Marathon”), an agent of 237 Granby in possession
2
of the two upper stories. 1 Marathon had hired Hourigan to
renovate and develop the condominium units.
Gadams and Marathon agreed to allow Station #2 access to
the second story to install the soundproofing material in the
void space between the ceiling of the first story and the floor
of the second story. Nevertheless, Hourigan closed the void
space without informing Station #2’s sound attenuation expert.
Hourigan claimed it had done so at Gadams’ and Marathon’s
direction. The Lynches subsequently refused to intervene on
behalf of Station #2 with Gadams and Marathon or to allow
Station #2 to install the soundproofing material in the void
space through the ceiling of the first story.
The City of Norfolk began citing Station #2 for violations
of its noise ordinance in the summer of 2005. After repeated
citations the City ordered Station #2 to cease all musical
performances in February 2006. Consequently, the restaurant
suffered a sharp decline in regular patronage. It also was
forced to cancel scheduled weddings, wedding rehearsals, and
parties. Station #2 informed Michael Lynch that it would
withhold payment of rent until it was permitted to install the
1
Station #2 alleged that Gadams purchased the upper
stories “through a company he owned” and the answer filed by
Gadams and Marathon does not deny that he owns 237 Granby. We
infer that Station #2 alleges Gadams, as a principal of
Marathon and owner of 237 Granby, and Marathon were agents of
237 Granby.
3
soundproofing material, whereupon he locked Station #2 out of
the premises. The restaurant ceased operation.
Station #2 filed an amended complaint in the circuit court
alleging breach of contract by Gadams and Marathon (“Count V”),
fraudulent inducement to contract by Gadams and Marathon
(“Count VI”), and statutory conspiracy among Gadams, Marathon,
and the Lynches (“Count VII”). 2 The defendants filed demurrers
to Counts VI and VII, which the circuit court sustained.
Gadams and Marathon also entered a special plea of the statute
of frauds to Count V. They asserted that installing
soundproofing material in the void space was analogous to
creating a party wall. Since an agreement to create a party
wall would permit Station #2 “to access and occupy the real
property,” it could not be enforced unless in writing. The
circuit court sustained the plea in bar and dismissed the case.
We awarded Station #2 this appeal.
II. ANALYSIS
A. THE DEMURRERS TO COUNT VI AND VII
“A demurrer tests the legal sufficiency of facts alleged
in pleadings, not the strength of proof. . . . Because the
decision whether to grant a demurrer involves issues of law, we
review the circuit court's judgment de novo.” Augusta Mut.
2
The complaint included other claims against the Lynches
and Hourigan that have been dismissed or non-suited and are not
before us in this appeal.
4
Ins. Co. v. Mason, 274 Va. 199, 204, 645 S.E.2d 290, 293 (2007)
(internal citations and quotation marks omitted). Station #2
argues that the circuit court erred in sustaining the demurrer
to Count VI because the complaint alleged all elements
necessary for a claim of fraud or fraudulent inducement. We
disagree.
Although we clearly have stated the proposition, we often
must repeat it: an omission or non-performance of a duty may
sound both in contract and in tort, but only where the omission
or non-performance of the contractual duty also violates a
common law duty. Richmond Metro. Auth. v. McDevitt Street
Bovis, Inc., 256 Va. 553, 558, 507 S.E.2d 344, 347 (1998)
(citing Foreign Mission Bd. v. Wade, 242 Va. 234, 241, 409
S.E.2d 144, 148 (1991)); see also Dunn Constr. Co. v. Cloney,
278 Va. 260, 266-67, 682 S.E.2d 943, 946 (2009); Augusta
Mutual, 274 Va. at 205, 645 S.E.2d at 293. The only duty
Station #2 alleged was contractual: that Gadams and Marathon
had agreed to allow Station #2 access to install the
soundproofing material. Consequently, Station #2 has not
pleaded a proper claim for fraud.
Even if we assume, as Station #2 invites us to do, that
Gadams’ and Marathon’s agreement induced Station #2 to contract
with the Lynches, and that Gadams’ and Marathon’s contractual
duty to allow the installation did not spring from the lease
5
between Station #2 and the Lynches, its fraud claim fails.
Station #2 contends it relied on its existing agreement with
Gadams and Marathon when it leased the first story from the
Lynches. It further contends that Gadams and Marathon never
intended to allow Station #2 to install the soundproofing
material. Consequently, their promise to do so was a false
representation of material fact.
In general, “if a defendant makes a promise that, when
made, he has no intention of performing, that promise is
considered a misrepresentation of present fact and may form the
basis for a claim of actual fraud.” SuperValu, Inc. v.
Johnson, 276 Va. 356, 368, 666 S.E.2d 335, 342 (2008); accord
Richmond Metro. Auth., 256 Va. at 560, 507 S.E.2d at 348. 3
However, Station #2 did not plead sufficiently that Gadams and
Marathon intended not to allow installation of the
soundproofing material at the time they promised to do so.
The only mention of a contemporaneous intent not to
perform on the promise to permit the installation appears in
Count VII, the statutory conspiracy claim:
[A]ll of the defendants were aware that there was
never an intention by any of them to allow sound
attenuation materials to be installed . . . or,
alternatively, they decided at some point to
3
We have expressly rejected the possibility that a false
promise could satisfy the requirement of a false representation
of material fact to support a claim of constructive fraud.
SuperValu, 276 Va. at 368 & n.2, 666 S.E.2d at 342 & n.2.
6
breach their agreements. In either event,
whether the promises were false at the inception
or were agreements that were broken later, the
defendants deceived the principals of Station #2
. . . .
Station #2 does not allege that Gadams’ and Marathon’s promise
was false when made but rather that the Lynches, Gadams, and
Marathon all agreed to prevent Station #2 from effecting the
installation, either before or after Station #2 entered into
the lease. Accordingly, Station #2’s allegations were
insufficient to establish a claim of fraudulent inducement.
The circuit court did not err in sustaining the demurrer to
Count VI. 4, 5
4
Because we find Station #2’s allegations insufficient, we
do not consider “whether a claim for fraud in the inducement
exists when the party engaging in the alleged fraudulent
conduct is not a party to the contract fraudulently induced.”
Augusta Mutual, 274 Va. at 206 n.4, 645 S.E.2d at 294 n.4.
5
Our determination that Station #2’s allegations are
insufficient does not alter the pleading requirements for a
fraud claim. We previously said, “[w]here fraud is relied on,
the pleading must show specifically in what the fraud consists,
so that the defendant may have the opportunity of shaping his
defence accordingly, and since fraud must be clearly proved it
must be distinctly stated.” Mortarino v. Consultant Eng'g
Servs., 251 Va. 289, 295, 467 S.E.2d 778, 782 (1996) (quoting
Ciarochi v. Ciarochi, 194 Va. 313, 315, 73 S.E.2d 402, 403
(1952)) (quotation marks and alterations omitted). To satisfy
this requirement, the plaintiff must state facts which, if
proved, establish all the elements of the claim. See, e.g.,
Van Deusen v. Snead, 247 Va. 324, 328-29, 441 S.E.2d 207, 209-
10 (1994) (reviewing argument that a claim for fraud failed to
allege facts to prove an element).
False representation of material fact is an element to a
claim for fraud. In this case, the alleged “false
representation” is a mere failure to perform on a promise,
which is only sufficient if the promisor had no intention of
7
Station #2 also argues that the circuit court erred in
sustaining the demurrers to Count VII because the complaint
alleged all elements necessary for a claim of statutory
conspiracy. We again disagree.
Code § 18.2-499 criminalizes conspiracies to “willfully
and maliciously injur[e] another in his reputation, trade,
business or profession by any means whatever.” Code § 18.2-500
allows victims of such conspiracies to claim treble damages and
attorney’s fees in a civil action. “[T]o survive demurrer, an
allegation of conspiracy, whether criminal or civil, must at
least allege an unlawful act or an unlawful purpose.” Hechler
Chevrolet, Inc. v. General Motors Corp., 230 Va. 396, 402, 337
S.E.2d 744, 748 (1985). Station #2 asserts that Gadams,
Marathon, and the Lynches acted unlawfully by preventing it
from installing the soundproofing material. Even assuming the
defendants conspired among each other, preventing Station #2
from installing the soundproofing material does not constitute
an “unlawful act.”
In Worrie v. Boze, 198 Va. 533, 536, 95 S.E.2d 192, 196
(1956), we recognized a common law claim of conspiracy by a
plaintiff who alleged the defendants had conspired to procure
the breach of a contract. We commented in Chaves v. Johnson,
performing at the time the promise was made. SuperValu, 276
Va. at 368, 666 S.E.2d at 342.
8
230 Va. 112, 119-20, 335 S.E.2d 97, 102 (1985), that such
claims were embraced by Code §§ 18.2-499 and 18.2-500. 6
However, we presently are of opinion that a conspiracy merely
to breach a contract that does not involve an independent duty
arising outside the contract is insufficient to establish a
civil claim under Code § 18.2-500. 7
To permit a mere breach of contract to constitute an
“unlawful act” for the purposes of the conspiracy statute would
be inconsistent with the diligence we have exercised to prevent
“turning every breach of contract into an actionable claim for
fraud.” Dunn Constr. Co., 278 Va. at 268, 682 S.E.2d at 946;
Augusta Mutual, 274 Va. at 208, 645 S.E.2d at 295; Richmond
Metro. Auth., 256 Va. at 560, 507 S.E.2d at 348. Non-
performance of a contractual promise does not, without more,
create a basis for recovery in tort. Likewise, we do not
believe it can rise to the level of an “unlawful act” under
Code § 18.2-500 for a similar reason: the duty of performance
under the contract springs solely from the agreement; the duty
is not imposed extrinsically by statute, whether criminal or
6
We later cited this comment in Nedrich v. Jones, 245 Va.
465, 474, 429 S.E.2d 201, 206 (1993). Retracting this dictum
does not disturb our decision in Nedrich. In that case, we
merely held that it was not sanctionable for an attorney to
seek treble damages for an alleged conspiracy to breach a
contract.
7
Because Station #2 does not state a claim for common law
conspiracy, we do not consider the common law action for
conspiracy to procure breach of contract recognized in Worrie.
9
civil, or independently by common law. Thus, non-performance,
without more, is not an “unlawful act.”
Applying this standard, the cases cited by Station #2 are
distinguishable. In Commercial Business Systems v. Bellsouth
Services, 249 Va. 39, 41, 453 S.E.2d 261, 263 (1995), the
plaintiff alleged an employee of the defendant awarded a
contract to the plaintiff’s competitor as the result of a
bribe. In Advanced Marine Enterprises v. PRC Inc., 256 Va.
106, 112, 501 S.E.2d 148, 151 (1998), the plaintiff alleged
that a defendant knew its actions would constitute actionable
tortious interference, knowingly weighed the cost of damages,
and purposefully proceeded with its plan to hire employees of
the plaintiff who were subject to a covenant not to compete.
In CaterCorp, Inc. v. Catering Concepts, Inc., 246 Va. 22, 26,
431 S.E.2d 277, 280-81 (1993), the plaintiff alleged that a
defendant competitor had conspired to work with a person still
in its employ, in violation of his common law duty of loyalty.
Similarly, the plaintiffs in Simmons v. Miller, 261 Va. 561,
578, 544 S.E.2d 666, 676-77 (2001), and Feddeman & Company v.
Langan Associates, P.C., 260 Va. 35, 46, 530 S.E.2d 668, 675
(2000), alleged an accompanying breach of fiduciary duty.
Station #2’s agreements with the Lynches and with Gadams
and Marathon do not implicate statutory or independent common
law duties. Consequently, merely alleging breach of those
10
contracts is insufficient to establish a claim of statutory
conspiracy under Code §§ 18.2-499 and 18.2-500. The circuit
court did not err in sustaining the demurrers to Count VII. 8
B. THE PLEA IN BAR TO COUNT V
While “[t]he standards of review for a defensive plea in
bar and a demurrer are substantially similar,” Sullivan v.
Jones, 42 Va. App. 794, 802, 595 S.E.2d 36, 40 (2004), “[a]
plea in bar presents a distinct issue of fact which, if proven,
creates a bar to the plaintiff’s right of recovery. The moving
party has the burden of proof on that issue.” Hilton v.
Martin, 275 Va. 176, 179-80, 654 S.E.2d 572, 574 (2008). A
circuit court’s judgment that a party has met his burden of
proof “will be upheld unless it is plainly wrong or without
evidence to support it.” Hudson v. Lanier, 255 Va. 330, 333-
34, 497 S.E.2d 471, 473 (1998); see also Upper Occoquan Sewage
Auth. v. Blake Constr. Co., 266 Va. 582, 590-92, 587 S.E.2d
721, 725-26 (2003) (reversing judgment on a plea in bar that
the court sustained without evidence to support it).
Gadams and Marathon argue that Station #2’s breach of
contract claim is barred by the statute of frauds. 9 However,
8
Because we have determined that Station #2 did not plead
a proper claim of fraud or fraudulent inducement, that claim
cannot be the predicate “unlawful act” for Station #2’s
statutory conspiracy claim.
9
The statute provides that “[u]nless a promise, contract,
agreement, representation, assurance, or ratification, or some
11
they have failed to prove that the statute applies. They argue
that Station #2 needed an easement to install the soundproofing
material in the void space. However, they did not prove that
237 Granby owned the void space. 10 Based upon these facts we
conclude that Station #2 merely needed a license, i.e.,
permission to enter the second story for the purpose of
installing the soundproofing material. 11
Permission to enter the real property of another does not
rise to the level of an easement. An easement concerns the
continuing use of real property. Russakoff v. Scruggs, 241 Va.
135, 138, 400 S.E.2d 529, 531 (1991) (“Easements are . . . the
privilege to use the land of another in a particular manner and
for a particular purpose.” (quoting Brown v. Haley, 233 Va.
210, 216, 355 S.E.2d 563, 567-68 (1987)) (internal quotation
marks omitted)); see also United States v. Blackman, 270 Va.
68, 76, 613 S.E.2d 442, 445 (2005) (“Easements are described as
being ‘affirmative’ easements when they convey privileges on
memorandum or note thereof, is in writing and signed by the
party to be charged or his agent, no action shall be brought
. . . [u]pon any contract for the sale of real estate, or for
the lease thereof for more than a year.” Code § 11-2(6).
10
At its hearing on the plea in bar, the circuit court
asked whether Gadams and Marathon wished to introduce evidence.
They declined and invited the court to rule on the pleadings.
11
We note that neither Gadams nor Marathon owned the upper
stories and that 237 Granby is not a party to this action.
However, while Gadams, Marathon, and 237 Granby are distinct
legal entities, we infer that Station #2 alleges Gadams and
Marathon, as agents of 237 Granby, had apparent authority to
grant Station #2 either a license or an easement.
12
the part of one person . . . to use the land of another . . . .
Easements are described as being ‘negative’ when they convey
rights to demand that the owner . . . refrain from certain
otherwise permissible uses of his own land.”). Permission
merely to enter the real property of another without such
continuing use is a license. Stanley v. Mullins, 187 Va. 193,
200, 45 S.E.2d 881, 885 (1948); Power v. Tazewells, 66 Va. (25
Gratt.) 786, 790 (1875).
“[T]he grant of an easement is embraced within the statute
of frauds, and therefore must be in writing.” Buckles v.
Kennedy Coal Corp., 134 Va. 1, 15, 114 S.E. 233, 237 (1922)
(quoting Wynn v. Garland, 19 Ark. 23, 34 (1857)) (internal
quotation marks omitted). However, it has long been
established that a license may be granted orally without
violating the rule. Power, 66 Va. (25 Gratt.) at 790. The
record establishes nothing more than that 237 Granby owned the
upper stories. Moreover, the parties agree that the circuit
court did not determine the ownership of the void space.
Without establishing 237 Granby as the owner, Gadams and
Marathon failed to show there was any real property in their
possession and control that Station #2 would need to use.
Absent such a showing, Station #2 required no more than their
permission to enter the second story.
13
Gadams and Marathon did not prove that the agreement
required more than the grant of a license to which the statute
of frauds does not apply. The circuit court erred in
sustaining their plea in bar because there is no evidence to
support it. We will reverse and remand for trial on Station
#2’s breach of contract claim. 12
III. CONCLUSION
For the reasons set forth above, we will affirm the
judgment of the circuit court as to both demurrers, reverse the
judgment sustaining the plea in bar, and remand for trial on
Station #2’s breach of contract claim.
Affirmed in part,
reversed in part,
and remanded.
12
By inviting the circuit court to rule on the pleadings,
Gadams and Marathon waived their opportunity to introduce
evidence supporting the plea in bar.
14