Present: All the Justices
CHARLES MCMILLION, ET AL.
v. Record No. 002802 OPINION BY JUSTICE CYNTHIA D. KINSER
September 14, 2001
DRYVIT SYSTEMS, INC.
FROM THE CIRCUIT COURT OF FAIRFAX COUNTY
Marcus D. Williams, Judge
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.
I. FACTS AND MATERIAL PROCEEDINGS
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
2
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
1
The McMillions have not appealed any ruling of the
circuit court with regard to these other defendants. Thus,
we will not identify those defendants or address any issue
concerning them.
3
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.
2
The circuit court sustained Dryvit’s demurrer to the
first amended motion for judgment but granted the
4
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.
II. ANALYSIS
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,
McMillions leave to amend.
5
rather than mere opinions as to future events, in their
fraud counts based on affirmative misrepresentations.
A. STATUTE OF LIMITATIONS FOR FALSE ADVERTISING
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. ___,
___, ___ S.E.2d ___, ___ (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
B. FRAUD BASED ON FAILURE TO DISCLOSE PRODUCT DEFECTS
3
In 1993, the limitation period in Code § 8.01-248 was
one year. An amendment to that statute, effective July 1,
1995, enlarged the limitation period to two years.
4
The McMillions do not raise any issue regarding the
date on which their cause of action for false advertising
accrued. Therefore, we do not address that question in
this appeal.
6
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
5
In the second amended motion for judgment, the
McMillions stated in Count VI, alleging actual fraud, and
in Count VII, alleging constructive fraud, that “[b]y
failing to disclose such inherent defects and
incompatibility to [the] McMillion[s], [Dryvit]
misrepresented material facts . . . .” However, in those
two counts in the third amended motion for judgment, the
McMillions alleged only that Dryvit made representations
7
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
about EIFS that it knew or should have known were false,
and that the McMillions relied upon those
misrepresentations to their detriment.
In paragraph 30 of the third amended motion for
judgment, the McMillions discussed Dryvit’s failure to warn
the public or the McMillions about the potential for water
damage such as that sustained by the McMillions’ house.
Even though the fraud counts incorporated preceding counts
and paragraphs in the third amended motion for judgment,
8
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.
This Court has said on numerous occasions that trial
courts speak only through their written orders and that
such orders are presumed to reflect accurately what
transpired. See, e.g., Waterfront Marine Constr., Inc. v.
the McMillions did not base those fraud counts on a failure
to disclose defects to the public.
6
The entire transcript from that hearing is not part
of the record on appeal.
7
In that order, the circuit court did not incorporate
its remarks from the bench contained in the transcript page
from the October 1999 hearing.
9
North End 49ers Sandbridge Bulkhead Groups A, B and C, 251
Va. 417, 427 n.2, 468 S.E.2d 894, 900 n.2 (1996); Stamper
v. Commonwealth, 220 Va. 260, 280-81, 257 S.E.2d 808, 822
(1979). Furthermore, in Delk v. Columbia/HCA Healthcare
Corp., 259 Va. 125, 129, 523 S.E.2d 826, 829 (2000), this
Court held that “[w]hen a circuit court sustains a demurrer
to an amended pleading which is complete in itself and
fails to incorporate by reference allegations in earlier
pleadings, we will consider only the allegations contained
in the amended pleading that was the subject of the
demurrer sustained by the judgment appealed from.” See
also Bell Atlantic-Virginia, Inc. v. Arlington County, 254
Va. 60, 63 n.2, 486 S.E.2d 297, 299 n.2 (1997); Norfolk &
W. Ry. Co. v. Sutherland, 105 Va. 545, 549-50, 54 S.E. 465,
466 (1906). Consequently, we consider only the allegations
in the McMillions’ third amended motion for judgment,
which, as previously stated, did not include claims of
actual or constructive fraud based on Dryvit’s failure to
disclose defects in its EIFS. Therefore, we cannot address
the merits of the question whether a manufacturer’s failure
to disclose known defects in its product to the public can
form the basis of a claim for fraud.
C. FRAUD BASED ON AFFIRMATIVE MISREPRESENTATIONS
10
The McMillions’ third question on appeal combines five
assignments of error that collectively challenge the
various possible grounds upon which the circuit court may
have sustained Dryvit’s demurrer to the claims for actual
and constructive fraud in the third amended motion for
judgment. Unfortunately, the circuit court did not
articulate the basis for that decision but stated in its
order only that Dryvit’s demurrer to Counts VI and VII in
the third amended motion for judgment, alleging actual and
constructive fraud, was sustained. However, under the
provisions of Code § 8.01-273, the circuit court could
consider only those grounds specifically stated by the
demurrant. Likewise, our consideration of the demurrer on
appeal is limited to the grounds raised by Dryvit. See
Chippenham Manor, Inc. v. Dervishian, 214 Va. 448, 451, 201
S.E.2d 794, 796 (1974). One of the grounds asserted by
Dryvit in its demurrer to the third amended motion for
judgment, which we find dispositive, was that the
McMillions failed to allege “that Dryvit made false and
material representations of pre-existing facts.” 8
On this issue, the McMillions argue that the circuit
court erred as a matter of law by finding that the
8
This ground is the subject of one of the assignments
of error included in the third question.
11
fraudulent misrepresentations identified by the McMillions
were mere unfulfilled promises as to future events. On
brief, they identify two alleged misrepresentations,
asserted in the third amended motion for judgment, that
were, according to the McMillions, “misrepresentations of
current performance characteristics” upon which they relied
and which directly caused the damages to their home. Those
alleged misrepresentations, which appeared in Dryvit’s
advertising brochure, are: 9
Damaging water penetration is avoided. Rain
finds its way into the wall structure when insulation
is placed inside. Conventional insulation absorbs
water over a period of time and eventually becomes
inefficient. With Outsulation, there are not routes
for water to enter. . . . The entire wall remains dry
and insulation values stay constant; . . . Interior
finishes remain stable.
Allows necessary water vapor transmission which
helps prevent condensation in the wall assembly.
We disagree with the McMillions’ position that these
alleged misrepresentations are statements of present facts.
“ ‘[F]raud must relate to a present or a pre-existing
fact, and cannot ordinarily be predicated on unfulfilled
promises or statements as to future events.’ ” Patrick v.
Summers, 235 Va. 452, 454, 369 S.E.2d 162, 164
9
The McMillions listed other alleged
misrepresentations in the third amended motion for judgment
but acknowledged on brief that those additional
12
(1988) (quoting Soble v. Herman, 175 Va. 489, 500, 9 S.E.2d
459, 464 (1940)). This Court stated in Mortarino v.
Consultant Eng’g Servs., Inc., 251 Va. 289, 293, 467 S.E.2d
778, 781 (1996)(citing Saxby v. Southern Land Co., 109 Va.
196, 198, 63 S.E. 423, 424 (1909)), that
[i]t is well settled that a misrepresentation, the
falsity of which will afford ground for an action for
damages, must be of an existing fact, and not the mere
expression of an opinion. The mere expression of an
opinion, however strong and positive the language may
be, is no fraud. Such statements are not fraudulent
in law, because . . .they do not ordinarily deceive or
mislead. Statements which are vague and indefinite in
their nature and terms, or are merely loose,
conjectural or exaggerated, go for nothing, though
they may not be true, for a [person] is not justified
in placing reliance upon them.
“We have not, however, established a bright line test
to ascertain whether false representations constitute
matters of opinion or statements of fact.” 251 Va. at 293,
467 S.E.2d at 781. Instead, “each case must in a large
measure be adjudged upon its own facts, taking into
consideration the nature of the representation and the
meaning of the language used as applied to the subject
matter and as interpreted by the surrounding
circumstances.” Packard Norfolk, Inc. v. Miller, 198 Va.
557, 562, 95 S.E.2d 207, 211 (1956).
misrepresentations did not directly cause the damages for
which they sought relief.
13
In the present case, we hold that the alleged
misrepresentations identified by the McMillions, when taken
in context, see id., are merely statements of opinion about
how Dryvit’s EIFS would perform in the future if utilized
in constructing a home. See Lumbermen’s Underwriting
Alliance v. Dave’s Cabinet, Inc., 258 Va. 377, 382, 520
S.E.2d 362, 365 (1999) (insurer’s false representation that
certain insurance policy would reduce insured’s premiums
was unfulfilled promise as to future event). To illustrate
the difference between a statement of opinion and one of
existing fact, we point to another representation in
Dryvit’s advertising brochure. On the same page of the
brochure upon which the second alleged misrepresentation
appeared, Dryvit stated that it uses only 100 percent
acrylic polymer formula in its finish coating. That
statement, if false, would be a misrepresentation of
existing fact because it pertains to the present quality or
character of Dryvit’s EIFS. See Tate v. Colony House
Builders, Inc., 257 Va. 78, 83-84, 508 S.E.2d 597, 600
(1999) (statement that house was free from structural
defects was representation of present quality or character
of property and, thus, statement of fact; whereas,
statement that no significant work would be required by way
of restoration or repair was representation predicated upon
14
future events, and could not form basis of action for
fraud); Mortarino, 251 Va. at 294, 467 S.E.2d at 781
(statement that wetlands were not present on tract of real
estate was representation of fact regarding property’s
present quality and character). Thus, for this reason
alone, the circuit court did not err in sustaining Dryvit’s
demurrer to the McMillions’ claims for actual and
constructive fraud based on affirmative
misrepresentations. 10
CONCLUSION
For the reasons stated, we will affirm the judgment of
the circuit court.
Affirmed.
10
In light of our decision, we do not need to address
any other assignments of error encompassed in the third
question. Nor do we reach the fourth question on appeal,
whether an allegation of fraud in the inducement of a
contract is an attempt to convert a contract action into
one based on tort.
15