Title: Mortarino v. Consultant Eng. Services
Citation: N/A
Docket Number: 951129
State: Virginia
Issuer: Virginia Supreme Court
Date: March 1, 1996

Present:  All the Justices 
 
GIOVANNI MORTARINO, ETC., ET AL. 
 
OPINION BY JUSTICE LEROY R. HASSELL, SR. 
v.   Record No. 951129                 March 1, 1996 
 
CONSULTANT ENGINEERING  
SERVICES, INC., ET AL. 
 
 
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH 
 
A. Bonwill Shockley, Judge 
 
 
The primary issue we consider in this appeal is whether 
certain statements contained in a report constitute facts that 
are actionable in a motion for judgment alleging constructive 
fraud.   
 
The trial court decided this case on demurrer and, 
therefore, we shall recite as true the facts alleged in the 
motion for judgment and its exhibits and fair inferences 
deducible therefrom.  Palumbo v. Bennett, 242 Va. 248, 249, 409 
S.E.2d 152, 152 (1991).   
 
Giovanni Mortarino was the trustee of MGT Virginia, Inc., an 
employee profit sharing trust established under the laws of 
Virginia.  Mortarino, individually, and MGT Virginia 
(collectively referred to as Mortarino), desired to purchase and 
develop about 73 acres of real property (the property) fronting 
on Johnstown Road in the City of Chesapeake.   
 
Mortarino made arrangements with James A. Morrow, sole 
proprietor of the Morrow Group of Companies (hereinafter referred 
to as Morrow), to acquire the property.  Morrow would serve as a 
"strawman" to obtain a purchase agreement and ultimately assign 
its interests in that agreement to Mortarino.  Morrow, acting as 
agent for Mortarino, executed a contract dated March 1988 to 
purchase the property from Great Bridge Baseball, Inc.   
 
Mortarino's purchase of the property from Morrow "was 
contingent upon the feasibility of development of the [p]roperty, 
unimpeded by governmental wetlands regulations."  Morrow executed 
a contract with Consultant Engineering Services, Inc. (CES), 
which agreed to conduct a wetlands and drainage feasibility study 
for the property.   
 
CES retained H. Clayton Bernick, III, a purported expert 
investigator and consultant on the existence and extent of 
wetlands with proposed development.  Dean G. Vincent, vice 
president of CES, stated in a report to Morrow: 
 
 
We contracted with Mr. Clay Bernick who 
specializes in investigating and consulting civil 
engineering firms on the existence and extent of 
wetlands with proposed development.  Mr. Bernick's 
experience and knowledge in this field is extensive and 
therefore his findings are quite reliable.  However, 
the presence of wetlands are [sic] so opinionated that 
there is always the possibility that a different 
interpretation could be made.  However if that were the 
case the only location that is remotely possible for a 
contrary determination to be made is a small area on 
the southern boundary of the property and the chances 
of this are only slight.  On the vast majority of the 
property Mr. Bernick finds nothing to indicate that 
wetlands are present.   
 
 
In reliance upon these representations, the market value of 
the property was deemed to be $570,000.  Subsequently, Morrow 
assigned its interests in the contract to Mortarino, who acquired 
the property from Great Bridge Baseball. 
 
In 1992, CES retained Davis Environmental Consultants, Inc., 
to ascertain the extent of wetlands on the property.  Davis 
Environmental Consultants determined that "[a]pproximately 80% of 
the property . . . is clearly jurisdictional wetlands."  
Subsequently, CES changed its earlier position and acknowledged 
that most of the property constitutes wetlands.  Ultimately, the 
United States Army Corps of Engineers determined that most of the 
property is jurisdictional wetlands.  Hence, Mortarino was unable 
to develop the property.   
 
Mortarino filed a motion for judgment against CES, Bernick, 
and Morrow, alleging that the defendants had committed acts of 
constructive fraud.  The defendants filed demurrers asserting 
that Mortarino failed to plead a cause of action for constructive 
fraud against them because the aforementioned statements in CES' 
report constitute opinions and, therefore, cannot be the basis of 
a cause of action for constructive fraud.  Additionally, 
defendant Bernick asserted that Mortarino failed to allege that 
Bernick made any representation to Mortarino and, therefore, no 
cause of action for constructive fraud was stated against 
Bernick.  The trial court sustained the demurrers and also 
refused to permit Mortarino to amend the motion for judgment.  We 
awarded Mortarino an appeal.   
 
Mortarino argues that the trial court erred by holding that 
the alleged fraudulent misrepresentation is an opinion which 
cannot form the basis for a cause of action for constructive 
fraud.  Defendants assert that the alleged misrepresentations do 
not refer to a present or past fact, but are expressions of 
opinion.   
 
Mortarino and defendants correctly observe that expressions 
of opinion cannot form the basis of an action for fraud: 
 
 
It 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 man is not justified in placing 
reliance upon them.   
 
Saxby v. Southern Land Co., 109 Va. 196, 198, 63 S.E. 423, 424 
(1909).  Additionally, "fraud 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 (1988) (quoting Soble v. 
Herman, 175 Va. 489, 500, 9 S.E.2d 459, 464 (1940)).   
 
We have not, however, established a bright line test to 
ascertain whether false representations constitute matters of 
opinion or statements of fact.  Rather, "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).  
And, as we observed in Garrett v. Finch, 107 Va. 25, 28, 57 S.E. 
604, 605 (1907): 
 
 
It is not always an easy matter to determine 
whether a given statement is one of fact or opinion.  
The relative knowledge of the parties dealing, their 
intentions and all of the surrounding circumstances, 
which can only be gathered from the evidence, affect 
the interpretation which the courts put upon the 
representations in determining whether they be of fact 
or opinion.   
 
 
We hold that the alleged misrepresentations contained in 
CES' report to Morrow are statements of fact.  CES represented in 
its report that "[o]n the vast majority of the property Mr. 
Bernick finds nothing to indicate that wetlands are present" and 
"the only location that is remotely possible for a contrary 
determination to be made is a small area on the southern boundary 
of the property and the chances of this are only slight."  These 
statements are unambiguous representations of the present quality 
or character of the property and, thus, are representations of 
fact, and not mere expressions of opinion.   
 
It is true, as the defendants point out, that CES stated in 
its report, "[h]owever, the presence of wetlands are [sic] so 
opinionated that there is always the possibility that a different 
interpretation could be made."  This statement, however, is not 
sufficient to absolve the defendants of any liability that might 
ensue because of the purported factual misrepresentations that 
are contained in this report.  For example, this purported 
disclaimer does not affect Vincent's factual representation that 
Bernick "finds nothing [on the property] to indicate that 
wetlands are present."   
 
Mortarino also argues that the trial court erred in holding 
that the motion for judgment fails to state a cause of action for 
constructive fraud against Bernick.  Mortarino says that the 
motion for judgment alleges that Morrow acted as Mortarino's 
agent and that "[a] person who enters into a fraudulent 
transaction with an agent, acting within the scope of his 
authority to bind a principal, is subject to liability to the 
principal whether the fraud is practiced upon the agent or upon 
the principal."   
 
Bernick responds that there are no factual allegations 
concerning him other than the fact that he performed a wetlands 
study for CES.  Bernick asserts that Mortarino does not allege 
Bernick was aware of Morrow or knew that a report was being 
furnished which would be used to establish a value on the 
property.  Further, Bernick asserts that "no contract, contact, 
knowledge, meetings, [or] representations between Bernick and 
either of the Plaintiffs are alleged."   
 
Initially, we observe, that "'[w]here fraud is relied on, 
the [pleading] must show specifically in what the fraud consists, 
so that the defendant may have the opportunity of shaping his 
defence accordingly, and since [fraud] must be clearly proved it 
must be distinctly stated.'"  Ciarochi v. Ciarochi, 194 Va. 313, 
315, 73 S.E.2d 402, 403 (1952) (quoting Alsop v. Catlett, 99 Va. 
364, 370, 34 S.E. 48, 50 (1899)); accord Campbell v. Bettius, 244 
Va. 347, 351, 421 S.E.2d 433, 435-36 (1992); Tuscarora v. B.V.A. 
Credit Corp., 218 Va. 849, 858, 241 S.E.2d 778, 783 (1978); 
Temple v. Jones, Son & Co., 179 Va. 286, 297, 19 S.E.2d 57, 61 
(1942).  We have stated that the elements of a cause of action 
for constructive fraud are a showing 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 his reliance upon the misrepresentation.  Evaluation 
Research Corp. v. Alequin, 247 Va. 143, 148, 439 S.E.2d 387, 390 
(1994); accord Nationwide Mut. Ins. Co. v. Hargraves, 242 Va. 88, 
92, 405 S.E.2d 848, 851 (1991); Kitchen v. Throckmorton, 223 Va. 
164, 171, 286 S.E.2d 673, 676 (1982).  Additionally, "[a] finding 
of . . . constructive fraud requires clear and convincing 
evidence that one has represented as true what is really false, 
in such a way as to induce a reasonable person to believe it, 
with the intent that the person will act upon this 
representation."  Alequin, 247 Va. at 148, 439 S.E.2d at 390.   
 
Here, the trial court properly sustained Bernick's demurrer 
because Mortarino failed to plead, with the requisite degree of 
particularity, facts which support all the elements of a cause of 
action for constructive fraud.  For example, Mortarino failed to 
plead that Bernick knew or had reason to know that Mortarino 
would rely upon Bernick's alleged misrepresentations or that 
Bernick knew that his representations would be placed in a report 
that would be used to determine the value of the property.   
 
Next, Mortarino asserts that the trial court abused its 
discretion by denying his motion for leave to amend the motion 
for judgment.  The defendants do not respond to this assignment 
of error in their respective briefs.   
 
Rule 1:8 states in part:  "[l]eave to amend shall be 
liberally granted in furtherance of the ends of justice."  
Whether to grant leave to amend "is a matter resting within the 
sound discretion of the trial court."  Kole v. City of 
Chesapeake, 247 Va. 51, 57, 439 S.E.2d 405, 409 (1994).  Here, 
nothing in the record suggests that the defendants would have 
been prejudiced by allowing an amended motion for judgment.  
Additionally, Mortarino had not previously amended his motion for 
judgment.  We conclude, therefore, that the trial court abused 
its discretion in failing to allow the filing of the amended 
motion for judgment. 
 
Accordingly, we will affirm that portion of the trial 
court's judgment holding that Mortarino failed to plead a cause 
of action for constructive fraud against Bernick.  We will 
reverse that portion of the judgment denying Mortarino's motion 
to amend the motion for judgment.  We will also reverse that part 
of the judgment sustaining the demurrers on the basis that the 
statements in Consulting Engineering Services' report constitute 
opinions.  We will remand this case for further proceedings 
consistent with this opinion. 
 
Affirmed in part, 
 
reversed in part, 
                                                and remanded.