Opinion
At Law No. 26541 At Law No. 26520
04-14-2003
Re: Priester, et. al. v. Small, et. al. Priester, et.al. v. Renaissance at River Creek Village, Inc., et. al.
Anne R. Noble, Esquire
Peter C. Grenier, Esquire
1150 Connecticut Avenue, N.W.
Washington, D.C. 20036 Jordan M. Samuel, Esquire
William F. Gibson, Esquire
1301 Connecticut Avenue, N.W.
Washington, D.C. 20036 Dear Counsel:
Defendants raise a number of objections to Plaintiffs' pleadings through a potpourri of pre trial motions. The Court ruled summarily upon certain of these motions from the bench. A ruling on other motions was taken under advisement. Plaintiffs' Motion Craving Oyer was denied for the reasons stated on the record. Decisions upon the motions to compel arbitration, waiver of a jury trial, and for consolidation and transfer were deferred.
In both of the above styled cases, the defendants have filed motions to strike allegations contained in the respective motions for judgment. There is no rule or statute that would sanction this procedure. Demurrer tests the sufficiency of a motion for judgment. Va. Code Ann. §8.01-273 (2003). Motions to strike are reserved for challenges to defensive pleadings. Va. Code Ann. §8.01-274 (2003).
The Supreme Court has recognized a limited right of a defendant to cause portions of a pleading to be stricken by the Court. In such cases the offending language has been found prejudicial to the defendant. Thus, "improper language" was stricken in Carwile v. Richmond Newspapers, 196 Va. 1, 4 (1954) and superfluous matter prejudicial to the jury in The Federal Land Bank of Baltimore v. Birchfield, 173 Va. 200 (1939). No such prejudice has been shown to exist in this case. Accordingly, the motions are denied.
Plaintiffs are the owners of a home located in the River Creek community in Loudoun County, Virginia. Their claims for damages arise out of circumstances attendant to the purchase of their home. In the one case (Law 26520), Plaintiffs seek recovery against corporate defendants with whom they contracted for the purchase of their new home. In a related case (Law 26542), the same plaintiffs seek to charge certain individuals who dealt with them in the acquisition and repair of their home.
It is suggested that the contract that forms the basis of the bargain between the parties is ambiguous with respect to the corporate nature of the seller and that personal liability that may attach to such individuals. In that connection, plaintiffs' contend, "...to the extent fraudulent acts were also committed by Renaissance, because Defendants failed to observe requisite corporate formalities, the corporate form must be disregarded and Defendants found personally liable for the obligations of the corporation." Defendants correctly observe that the motion for judgment does not properly state claims seeking to "pierce the corporate veil" of the defendant corporations.
In their action against defendants Small, Schwartz, Andonov, and Lastner, Ms. Priester and Mr. Butt seek recovery based upon claims of fraud, constructive fraud, and civil aiding and abetting. Defendants have filed demurrers to all of the counts as to each of the defendants. In ruling upon the demurrers, the Court is mindful of its responsibility to accept the verity of not only the facts as pled but also those implied or inferred from the motion for judgment. Luckett v. Jennings, 246 Va. 303 (1993).
Plaintiffs seek, inter alia, rescission and restitution in addition to both compensatory and punitive damages. Defendants correctly identify these as equitable remedies. However, the fact such remedies do not lie in actions at law does not warrant a dismissal of such claims. Va. Code Ann. §8.01-270 (Michie 2003). Should plaintiffs seek to pursue such claims, the matter may be transferred to the chancery docket.
It is alleged that the formalities necessary to the formation of a contract were not observed. Accordingly, it is the contention of the plaintiffs such a failure suggests that the individuals may be held liable for tortuous conduct resulting in plaintiffs' injury and damages. Defendants correctly observe that should the plaintiffs seek to lift the corporate veil and impose liability upon the defendants as the "alter egos" of the corporation, the pleadings do not state such claims as would entitle them to relief.
The Supreme Court has cautioned against permitting recovery in damages in tort where the duty imposed upon the offending party is contractual. Foreign Mission Board v. Wade, 242 Va. 234 (1991). However, where a cause of action for damages arises out of a breach of a common law duty, then an injured plaintiff may pursue recovery in tort. Van Deusen v. Snead, 247 Va. 324 (1994). In cases of fraud, this may include both acts of misrepresentation and concealment. Id. at 329. Thus, claims for actual and constructive fraud in the inducement to form a contract will survive demurrer where such fraud involves preexisting facts rather than opinion or statements of future events. Prospect Development Co. v. Bershader, 258 Va. 75 (1999). Fraud in the inducement may form the basis of an action for rescission or damages. Thus,
[a] buyer can show that a contract of sale was induced by the seller's fraud, notwithstanding the fact the sale was made 'as is'. The same is true even though the written contract contains covenants waiving warranties or disclaiming or limiting liabilities. Robberecht v. Maitland Bros., 220 Va. 109, 112 (1979).Plaintiffs have alleged acts of both actual and constructive fraud. In order to prove fraud, it is necessary to establish a misrepresentation of a past or existing fact. Unfulfilled promises and statements of future events will not support such and action. Blair Construction v. Weatherford, 253 Va. 343, 347 (1997) (citation omitted).
Where one aids and abets a fraud, they may be held liable for the damages sustained as a result of the actions of the principal. Daingerfield v. Thompson, 74 Va. (33 Gratt.) 136 (1880); Patteson v. Horsley, 70 Va. (29 Gratt.) 263 (1877); Tysons Toyota, Inc. v. Globe Life Insurance Co., 1194 U.S. App. LEXIS 36692 (4th Cir. 1994); Kieft v. Becker, 2002 Va. Cir. LEXIS 33 (Fairfax County 2002). However, in order to recover damages against one who aids and abets in the commission of a fraud, it must be shown that not only the underlying fraud was committed but, "...that there was knowledge of this fraud on the part of the aider and abettor, and substantial assistance by the aider and abettor in the achievement of the fraud, and that damages to the plaintiff were proximately caused thereby." 37 Am. Jur. 2d Fraud and Deceit §302 (2002).
However, fraud must be pled with specificity.Tuscarora v. R.V.A., 218 Va. 849 (1978). There is no reason that one who seeks recovery for aiding and abetting a fraud should be held to any lesser requirement. A proper articulation of the claims against each of the defendants should avoid omissions as well as ambiguity. Although forty pages in length, the pleadings as to the individual defendants lack the specificity necessary to put the each of the defendants on notice as to their individual culpability in the wrongdoing for which the plaintiffs seek $5,000,000.00 in damages.
Noticeably, the pleadings fail to identify a relationship between the breach of each of the defendants and resulting damage. This might be cured through specific counts addressing the individual claims asserted as to each of the defendants. Accordingly, the demurrers will be sustained to each of the counts, with leave granted to the plaintiffs to file an amended pleading within twenty-one days.
Absent a finding of a duty owed irrespective of the contract between the parties, the plaintiff's cannot recover based upon fraud or constructive fraud. "A tort action cannot be based solely on a negligent breach of contract." Richmond Met. Auth. V. McDevitt Street Bovis, Inc., 256 Va. 553 (1998). As to the difference between actual and constructive fraud, it has been stated,
[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. (authorities omitted). 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." (authority omitted).
Id. at 557, 558.
Plaintiffs have complained of both fraud and constructive fraud in their suit against the corporate defendants, Renaissance at River Creek Villas, Inc. and Renaissance Housing Corporation. In addition to such claims of fraud (Count I) and constructive fraud (Count II), they seek damages from these defendants based upon breach of contract (Count III); (Breach of Implied Warranty- Va. Code §55-70.1( 2003)) (Count IV); Violation of the Virginia Consumer Protection Act- Va. Code §59.1-196 (2003) (Count V); Trespass (Count VI) ; Negligent Retention (Count VII); Negligence-Personal Injury (Count VIII); Battery (Count IX); Strict Liability-Design Defect (Count X); and Civil Aiding and Abetting (Count XI). Plaintiffs seek recovery of both compensatory and punitive damages as a result of claimed misconduct by the defendants.
The motion to dismiss Renaissance Housing Corporation was taken under advisement.
For purposes of ruling upon the demurrers to the motion for judgment filed against the corporate defendants, the Court will adopt by reference its earlier comments: Fraud and Constructive Fraud of Corporate Defendants (Counts I and II)
Plaintiffs have alleged sufficient facts to support claims for fraud and constructive fraud in the inducement. The demurrer is overruled as to this count. Breach of Contract (Count III).
Plaintiffs have stated a cause of action for breach of contract. The demurrer as to this count is overruled. Defendants' arguments are best reserved for summary judgment prior to trial or upon a challenge to the sufficiency of plaintiffs' evidence to support recovery. Breach of Implied Warranty (Violation of Va . Code §55-70.1(2003)) , (Count IV).
Whether there has been a waiver of the warranties provided for by statute is a question of fact to be resolved by way of summary judgment or a trial on the merits. The demurrer to Count IV is overruled. Violation of the Virginia Consumer Protection Act ( Va . Code Ann.§59.1-196 (2003)) , (Count V).
Defendants' challenge to plaintiffs' allegations concerning violations of the Virginia Consumer Protection Act involve factual matters they cannot be resolved on demurrer. The demurrer to Count V is overruled. Trespass (Count VI)
Plaintiffs are only required to allege those facts that will clearly inform the defendants of the true nature of their claim. Va. Sup. Ct. R. 1:4. The instant pleading fulfills this requirement. Defendants' demurrer to Count VI is overruled. Negligent Retention (Count VII)
The tort of negligent retention requires that the injured party demonstrate that the party sought to be held liable failed to act to prevent injury by an employee when that part knew or should have known that the employee posed an unreasonable risk of physical harm to others. Philip Morris Inc. v. Emerson, 235 Va. 380 (1988). Plaintiffs state sufficient facts to put the defendants on notice of this claim. The demurrer to Count VII is overruled. Negligence-Personal Injuries (Count VIII)
Although the instant pleading contains alleged instances of negligence giving rise to this personal injury claim, it is not necessary that the particulars of such negligence be pled in order to survive demurrer. Va. Sup. Ct. R. 3:16. The demurrer to Count VIII is overruled. Battery (Count IX)
Plaintiff correctly observes that it is not necessary in a civil action for a battery that a specific intent to injure a particular person be shown. Thus,
...where one commits a wanton, reckless and dangerous act, which may result in injury to any one of a number of others, such as shooting into a crowd, he is guilty of assault and battery...every person is liable for the direct, natural and probable consequences of his acts, and that every one doing an unlawful act is responsible for all of the consequential results of the act. Bannister v. Mitchell, 127 Va. 578, 584 (1920).
The instant pleadings fall short of alleging that the defendants harbored intent to injure or that they acted in a way evidencing such intent. Defendants' demurrer is sustained with leave to the Plaintiffs' to replead this count within twenty-one days should they be so advised. Strict Liability-Design Defect (Count X)
Virginia does not recognize a cause of action for strict liability arising out of a design defect. Sensenbrenner v. Rust, Orling & Neale, Architects, Inc., 236 Va. 419 (1988). The demurrer to Count X is sustained and will be dismissed. Civil Aiding and Abetting (Count XI)
As noted above, while there is a difference of opinion between the judges of this Circuit as to the existence of the cause of action for aiding and abetting, this Court has previously ruled, consistent with the authorities set forth above, that such a cause of action exists. However, the instant pleading does not state such a cause with requisite specificity. Accordingly, the demurrer will be sustained, with leave granted to the plaintiffs to replead this count within twenty-one days, should they be so advised.
The Court will direct that counsel for the plaintiffs draw an Order consistent with this opinion to which counsel may note their exception.
Very truly yours,
Thomas D. Horne, Chief Judge