Richmond Metropolitan Authority v. McDevitt Street Bovis, Inc.
507 S.E.2d 344, 256 Va. 553, 1998 Va. LEXIS 146 (1998)
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Rule of Law:
A cause of action for fraud cannot be maintained when the duty allegedly breached by misrepresentation or concealment exists solely by virtue of a contract between the parties; the duty must be an independent common law duty to give rise to an action in tort.
Facts:
- On August 31, 1984, Richmond Metropolitan Authority (RMA) entered into a Design-Build Contract with McDevitt Street Bovis, Inc. (McDevitt) for the construction of the Diamond Baseball Stadium in Richmond.
- The Diamond’s design criteria included 32 pre-cast/post-tensioned concrete structural members known as 'bents,' which were to have hollow conduits containing steel tendons/bars that required injection with grout and subsequent sealing of grout tubes.
- McDevitt constructed the Diamond during the winter of 1984-1985, during which time it submitted 'APPLICATION AND CERTIFICATE FOR PAYMENT' forms, 'as-built' drawings, an Application for Final Payment, and an Affidavit of Payment and Certificate of Substantial Completion to RMA.
- These submitted documents contained sworn statements or representations by McDevitt that the work was completed in accordance with the Design-Build Contract's design criteria.
- Around February 1996, RMA discovered that many conduits contained no grout or insufficient grout, leading to corrosion of the steel tendons/bars.
- RMA also learned that McDevitt had sealed empty grout tube openings, creating a false impression of compliance, and that three conduits contained no steel tendons/bars.
- As a result of McDevitt’s failure to construct the Diamond according to design criteria, RMA claimed the stadium failed to meet building codes and its structural durability and strength were impaired.
Procedural Posture:
- On February 10, 1997, Richmond Metropolitan Authority (RMA) filed a motion for judgment against McDevitt Street Bovis, Inc. (McDevitt) in the Circuit Court of the City of Richmond (the trial court), alleging breach of contract (Count I), actual fraud (Count II), and constructive fraud (Count III).
- McDevitt filed a plea in bar, asserting that the five-year statute of limitations for written contracts (Code § 8.01-246(2)) barred Count I, and the statute of repose (Code § 8.01-250) precluded all three counts.
- On May 6, 1997, the circuit court sustained McDevitt’s plea as to Count I, dismissing the breach of contract claim, but overruled the plea in bar as to Counts II and III, allowing the fraud claims to proceed.
- Thereafter, McDevitt moved for summary judgment on RMA’s claims for actual and constructive fraud (Counts II and III).
- On October 27, 1997, the circuit court entered an order sustaining McDevitt's motion for summary judgment and granted judgment for McDevitt on the fraud claims, ruling that the duties allegedly breached were specifically required by the contract and not separate and independent from it.
- RMA (appellant) appealed the circuit court’s judgment regarding the dismissal of Counts II and III to the Supreme Court of Virginia, while McDevitt (appellee) assigned cross-error to the circuit court’s ruling that Counts II and III were not time-barred by Code § 8.01-250.
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Issue:
Does a party's misrepresentations and physical concealment regarding compliance with a construction contract's design criteria give rise to claims for actual and constructive fraud, or do such actions constitute only a breach of contract, when the duties allegedly breached are specifically required by the contract?
Opinions:
Majority - Justice Cynthia D. Kinser
No. A party's misrepresentations and physical concealment regarding compliance with a construction contract's design criteria do not give rise to claims for actual and constructive fraud when the duties allegedly breached exist solely by virtue of the contract. Justice Kinser, writing for the majority, affirmed the circuit court's dismissal of the fraud claims, reiterating the 'source of the duty' rule from Oleyar v. Kerr, Trustee and Foreign Mission Bd. v. Wade. The Court held that a tort action cannot be based solely on the negligent or intentional breach of a contractual duty unless there is a corresponding common law duty independent of the contract. All of McDevitt's alleged misrepresentations and concealments—such as submitting false payment applications, providing inaccurate 'as-built' drawings, and improperly grouting and sealing the bents—related to specific duties and obligations explicitly required by the Design-Build Contract. Even the physical act of sealing the empty grout tubes was part of the contracted construction process. The Court distinguished the case from 'fraud in the inducement,' as there was no evidence McDevitt lacked the intent to fulfill the contract at the time of its formation, unlike the scenario in Colonial Ford Truck Sales v. Schneider. The Court concluded that allowing such claims would improperly 'turn every breach of contract into an actionable claim for fraud,' and that the appropriate, though time-barred, remedy was a breach of contract action.
Analysis:
This case significantly reinforces the 'source of the duty' rule in Virginia, clarifying the distinction between breach of contract and fraud claims. It prevents parties from circumventing contractual limitations, like statutes of limitations, by recharacterizing a contract breach as a tort claim, unless an independent common law duty is also breached. The ruling emphasizes that misrepresentations about contractual performance, even if intentional, do not automatically transform a contract dispute into a fraud action if those representations concern duties explicitly outlined in the contract. This limits the scope of fraud claims in construction and other contractual settings where performance representations are common.
