Title: Richmond Metropolitan Authority v. McDevitt Street

State: virginia

Issuer: Virginia Supreme Court

Document:

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, 
 
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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. 
 
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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.  
 
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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. 
 
 
 
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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 
 
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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 
 
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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. 
 
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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 
 
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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.  
 
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