Present: All the Justices
RICHMOND METROPOLITAN AUTHORITY
v. Record No. 980081 OPINION BY JUSTICE CYNTHIA D. KINSER
November 6, 1998
McDEVITT STREET BOVIS, INC.
FROM THE CIRCUIT COURT OF THE CITY OF RICHMOND
Theodore J. Markow, Judge
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,
2
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
1
RMA also named an engineering firm hired to monitor
construction of the Diamond as a defendant in the suit.
RMA subsequently nonsuited the counts against that firm.
2
Code § 8.01-246(2) establishes a five-year statute of
limitations for an action on any written contract.
3
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
____________________
3
Code § 8.01-250 provides, in part, as follows:
No action to recover for any injury to property,
real or personal, or for bodily injury or wrongful
death, arising out of the defective and unsafe
condition of an improvement to real property, nor
any action for contribution or indemnity for damages
sustained as a result of such injury, shall be
brought against any person performing or furnishing
the design, planning, surveying, supervision of
construction, or construction of such improvement to
real property more than five years after the
performance of furnishing of such services and
construction.
4
For purposes of the motion for summary judgment,
McDevitt asked the court to accept as true the allegations
in RMA’s motion for judgment and its answers to McDevitt’s
interrogatories.
4
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
5
RMA does not assign error to the circuit court’s
dismissal of its breach of contract claim.
5
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 (1993)). 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
6
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 Spence v. Norfolk &
W. R.R. Co., 92 Va. 102, 116, 22 S.E.2d 815, 818 (1895)).
In Foreign Mission Bd., the plaintiffs alleged that
the defendant had failed to use ordinary care to protect
them from continued sexual abuse. There was an oral
contract between the parties; however, the plaintiffs
brought suit not only for breach of contract but also for
negligence. We affirmed the trial court’s dismissal of the
negligence count because the plaintiffs sought to
“establish a tort action based solely on the negligent
7
breach of a contractual duty with no corresponding common
law duty.” 242 Va. at 241, 409 S.E.2d at 148.
With the principles enunciated in Oleyar and Foreign
Mission Bd. in mind, we first address RMA’s claim for
constructive fraud. The essence of constructive fraud is
negligent misrepresentation. See Mortarino, 251 Va. at
295, 467 S.E.2d at 782. In the present case, RMA’s
allegations of constructive fraud are nothing more than
allegations of negligent performance of contractual duties
and are, therefore, not actionable in tort. A tort action
cannot be based solely on a negligent breach of contract.
Turning to the claim for actual fraud, we agree with
the circuit court that each particular misrepresentation by
McDevitt related to a duty or an obligation that was
specifically required by the Design-Build Contract.
McDevitt contracted to inject grout into the conduits, to
fill the grout tubes before cutting them off and sealing
them, to submit accurate applications for payments, and to
present an accurate certificate of substantial completion
and “as-built” drawings. McDevitt may have breached each
one of these contractual duties, but its actions do not
give rise to a cause of action for actual fraud, albeit
McDevitt misrepresented its compliance with the design
criteria.
8
Even on the concealment issue, RMA conceded during
oral argument that the Design-Build Contract required that
the ends of the grout tubes be cut off and sealed. Thus,
this step was part of the construction process and not an
action undertaken by McDevitt solely to hide its failure to
inject grout into the conduits. In short, RMA has alleged
only McDevitt’s breach of contractual obligations “because
no duty apart from contract to do what is complained of
exists.” Oleyar, 217 Va. at 90, 225 S.E.2d at 399. The
source of any duty breached in this case is solely from the
Design-Build Contract between the parties.
Citing the decision of the United States Court of
Appeals for the Fourth Circuit in Flip Mortgage Corp. v.
McElhone, 841 F.2d 531 (4th Cir. 1988), RMA, nonetheless,
contends that McDevitt’s submission of applications for
payment containing misrepresentations constitutes
actionable fraud. In Flip, allegations of fraud were
based, in part, on the submission of false revenue reports
almost from the beginning of the contractual relationship.
Id. at 537. The Court of Appeals based its finding of
actionable fraud, arising out of a contractual
relationship, upon the fact that there was fraud in the
inducement. The court viewed the false revenue reports as
circumstantial evidence of the intent never to abide by the
9
terms of the contract. Id. The court concluded that Flip
Mortgage had alleged a cause of action for fraud based on
the principles enunciated by this Court in Colonial Ford
Truck Sales v. Schneider, 228 Va. 671, 325 S.E.2d 91
(1985). In Colonial Ford, we held that “the promisor’s
intention . . . [w]hen he makes the promise, intending not
to perform . . . is a misrepresentation of present fact
. . . [that] is actionable as an actual fraud.” Id. at
677, 325 S.E.2d at 94.
The present case is not one of fraud in the
inducement. Nothing in the record suggests that McDevitt
did not intend to fulfill its contractual duties at the
time it entered into the Design-Build Contract with RMA.
Therefore, RMA’s reliance on Flip is misplaced. We are
likewise not persuaded by the rationale of the court in
Vanguard Military Equip. Corp. v. David B. Finestone Co.,
Inc., 979 F. Supp. 401 (E.D. Va. 1997), a case relied upon
by RMA.
In ruling as we do today, we safeguard against turning
every breach of contract into an actionable claim for
fraud. The appropriate remedy in this case is a cause of
action for breach of contract, which unfortunately is time-
barred.
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For these reasons, we will affirm the judgment of the
circuit court. 6
Affirmed.
6
In light of our decision, we do not reach the
parties’ other arguments or the assignments of cross-error.
11