Court Opinion

ID: 8999305
Source: CourtListenerOpinion
Date Created: 2022-11-27 12:55:15.410044+00
Date Added: 2024-06-11T17:11:08.128049
License: Public Domain

LUTTIG, Circuit Judge,
concurring in part and dissenting in part:
I concur in all but part IV of the court’s opinion. The issue in part IV is whether appellants’ fraud claim against Exxon is barred by the West Virginia statute of limitations. The dispositive question in resolving this issue is when, under West Virginia law, a fraud cause of action acames. I cannot discern whether the majority correctly applies an incorrect rule of law or incorrectly applies the correct rule of law in resolving this question. I am convinced, however, that it has erred in one of these two respects, and in either event, has mistakenly concluded that appellants’ fraud claim is barred by section 55-2-12 of the West Virginia Code. For this reason, I dissent from the court’s holding in part IV.
I.
I believe the better reading of the court’s opinion is that it applies an incorrect rule of law in deciding when appellants’ fraud cause of action accrued. The court holds,, on the authority of Stemple v. Dobson, 184 W.Va. 317, 400 S.E.2d 561 (1990), that as a matter of law the statute of limitations began to run when appellants discovered that Exxon was building a competing service station, because on that day appellants knew that they had been injured and who had injured them. In so holding, the majority misreads Stemple as to the applicable rule governing accrual of causes of action in fraud cases. Stemple could not be clearer, in both its statement of West Virginia law and its application of that law to the facts before it, that the statute of limitations for fraud actions begins to run when the plaintiff knows or should know of the “nature of his injury,” 400 S.E.2d at 565, not, as the majority holds, when he knows that he has been injured and who has injured him. Knowledge of the injury and knowledge of the injurer are necessary conditions for accrual of a fraud cause of action, but they are not sufficient conditions under West Virginia law.
The puzzling aspect of the court’s opinion is that it correctly recites the applicable rule from Stemple, see ante at 1272, but then proceeds, without explanation, to inquire not as to when appellants knew of the nature of their injury, but as to when appellants knew that they had been injured and who had injured them. See ante at 1272 (“ ‘injury’ [i]s the thing to be discover*1274ed”); ante at 1273 (“knowledge of the injury and the injurer is enough”). The only explanation for the court’s failure to conduct the inquiry that it acknowledges is required under Stemple is its apparent belief that there is no distinction under West Virginia law between the time when one knows that he has been injured (and who has injured him) and the time when one knows the nature of his injury. It is plain from Stemple, however, that West Virginia does recognize such a distinction in fraud cases, and that the statute of limitations does not begin to run until the plaintiff knew or should have known of the nature of his injury. Not only does the opinion so state explicitly, see 400 S.E.2d at 565; cf. Sewell v. Gregory, 179 W.Va. 585, 371 S.E.2d 82, 84 (1988) (negligence case),1 the court’s disposition of the claim in that case confirms that this is the applicable rule.
In Stemple, the plaintiffs purchased a house in November 1985 after having been assured by the defendants that termites had not damaged the house’s structure. Soon after moving in, the plaintiffs noticed flying insects in the house. An inspection in January 1986 disclosed termite damage to the exterior of the house. A subsequent inspection in February 1988 revealed substantial structural damage caused by the prior termite infestation. Plaintiffs brought their breach of contract and fraud action in April 1988, more than two years after the plaintiffs knew as a result of the initial termite inspection that they had been injured and by whom. The trial court granted the defendants’ motion for summary judgment on the ground that the two-year limitations period began to run no later than the time the first inspection was conducted and thus had completely run before the plaintiffs commenced their suit.
The West Virginia Supreme Court of Appeals reversed. The court noted that the dispositive question was when the plaintiffs knew or should have known that there was substantial termite damage to the house. 400 S.E.2d at 565. It concluded that this was a question for the jury, notwithstanding that plaintiffs knew in January 1986 not only that they had been injured as a result of the prior infestation, but also that they had been injured by the sellers. The court reasoned that although the plaintiffs knew that they had been injured in January 1986, they did not at that time necessarily know or have reason to know of the nature of their injury — i.e., that they had been deceived when they were informed that there was no structural damage. Thus, it is clear from Stemple that mere knowledge of injury and injurer is insufficient to begin the running of the statute of limitations in a fraud action; if such knowledge were sufficient, the court would have affirmed the trial court’s award of summary judgment in the defendants’ favor. Instead, the plaintiff also must know or have reason to know of the nature of his injury.
I believe that, although appellants in this case knew that they were injured and by whom when Exxon began building the competing service station, they did not, as a matter of law, know or have reason to know at that time of the nature of the injury that underlay their fraud claim. The nature of the injury underlying a fraud claim is deception. See Stanley v. Sewell Coal Co., 169 W.Va. 72, 285 S.E.2d 679, 683 (1981) (fraud “consists of intentional deception”); see also Holmberg v. Armbrecht, 327 U.S. 392, 397, 66 S.Ct. 582, 585, 90 L.Ed. 743 (1946) (Frankfurter, J.) (statute of limitations in fraud case does not begin to run until plaintiffs “hav[e] discovered, or ha[ve] failed in reasonable diligence to discover, the alleged deception” (emphasis added)).2 In my view, reasonable jurors *1275could conclude that, although appellants knew or should have known when construction of the station began that Exxon had breached its contract, appellants did not have reason to know of the possibility of deception until they learned in 1988 that Exxon had always intended to build a competing station. Accordingly, I would reverse the district court’s dismissal of appellants’ fraud claim.
II.
I believe for the aforementioned reasons that the majority simply applied an incorrect rule of law in rejecting appellants’ fraud claim. But even were I to assume from the fact that the majority presumes the correctness of Stemple that it is actually applying the Stemple rule sub rosa,3 I still could not join part IV of its opinion. For if it is applying the correct rule, it is applying it incorrectly.
If the majority is applying the correct rule, it clearly believes that Stemple dictates its conclusion that appellants should have been aware of the nature of their injury as a matter of law when construction of the competing service station began. This belief in turn seems to be premised on its assumptions first, that appellants’ knowledge of the competing service station is analogous to the Stemple plaintiffs’ knowledge of structural damage gained from their second termite inspection, and second, that the court in Stemple would have affirmed summary judgment for the defendants had the plaintiffs in that case brought their action more than two years after the second inspection. Stemple, however, does not dictate the conclusion reached by the majority, because a fundamentally different kind of fraud claim from appellants’ was at issue in that case.
The alleged fraud in Stemple was misrepresentation not as to present intention about a future action, but as to a present fact — that at the time of purchase, the house did not have structural damage from the termite infestation. When the alleged misrepresentation is as to an existing fact, it is appropriate to hold, as a matter of law, that the plaintiff knew or should have known that he may have been deceived when he discovered that the facts were other than they were represented to be. However, where, as here, the alleged misrepresentation is as to present intention about a future action, it does not necessarily follow from the fact that the action is ultimately different from what was represented that the defendant misrepresented his intention. It' could well be that the defendant intended to perform consistent with his representation, but changed his mind between the time of the promise and the time of expected performance. Under such circumstances, while as a matter of law the plaintiff perhaps should have known that the defendant had breached his contract, it is not necessarily the case that he also should have known that the defendant had committed fraud. As the majority recognizes, “[bjreaking a promise, without more, is only a breach of contract.” Ante at 1271.
It is precisely because not every breach of contract necessarily entails fraud that courts require more than mere knowledge of breach before they will hold a plaintiff to knowledge of possible fraud for purposes of statutes of limitations. And it is because of this requirement of additional information beyond mere breach that the plaintiff’s knowledge is generally held in such cases to be the quintessential jury issue. In Board of Educ. v. Plymouth Rubber Co., 82 Md.App. 9, 569 A.2d 1288, cert. denied, 320 Md. 505, 578 A.2d 778 (1990), for example, a school board brought a breach of contract action against a subcontractor who had agreed to perform any necessary repairs on a roof that the subcontractor had recently installed. The suit was instituted after the new roof had begun to leak, and the subcontractor had made a number of unsuccessful attempts to repair the roof. During discovery, one of the subcontractor’s managers testified *1276that despite having discovered soon after the roof was installed that it was irreparable and would have to be replaced, he recommended to the school board that the repair work continue. Based upon this testimony, the board sought to amend its complaint so as to include a fraud claim in addition to its contract claim. The subcontractor argued that the statute of limitations for the fraud claim had begun to run as soon as the school board discovered that the roof could not be repaired and would have to be replaced, and that the fraud claim was therefore time-barred.
The Maryland Court of Special Appeals rejected this argument. After stating that in Maryland, “limitations do not commence to run as to a tort claim until the plaintiff knows or reasonably should know of a basis for the cause of action asserted,” the court held that until the deposition, the school board “had no reasonable basis to believe that [the subcontractor] had intentionally misrepresented to it the true condition of the ... roof in order to avoid replacing it,” and that “[t]his alleged misrepresentation is the basis for [the board’s] fraud ... claim[ ].” Id. at 1294.
Similarly, in Mister Donut of Am., Inc. v. Harris, 150 Ariz. 321, 723 P.2d 670 (1986), an Arizona doughnut franchisee was assured by his franchisor prior to executing their contract that the manufacturer of the doughnut mixes needed by the franchisee would soon be establishing a distributorship in Arizona. In 1980, nearly three years after the franchise opened, the franchisee discovered that the franchisor had known all along that the mix manufacturer would not be establishing a distributorship in Arizona, because a restrictive covenant prevented the manufacturer from doing business in that state.
The Arizona Supreme Court acknowledged that the statute of limitations for the franchisee’s breach of contract claim may have begun to run as soon as it became apparent that the franchisor had failed to fulfill its promise that the mix manufacturer would establish a distributorship in Arizona. The court held, however, that the lower court had erred in concluding, as a matter of law, that the statute of limitations for the franchisee’s fraud claim began to run on the same day:
Breach of contract and fraud are not the same and there can be one without the other or one before the other. That appears to be the case herein. There was evidence of breach of contract before ... 1980, but the evidence was such that the jury could find that fraud was not discovered or discoverable until [1980]....
Id. 723 P.2d at 673 (citation omitted).
I believe that West Virginia courts would recognize the significant difference between a claim based upon misrepresentation as to present intention about a future action, such as appellants’, and a claim based upon misrepresentation as to an existing fact, such as that in Stemple, were they presented with the issue. I do not believe they would accept the majority’s reasoning that the construction of the service station in this case is analogous to the second termite inspection in Stemple insofar as the accrual of appellants’ fraud cause of action is concerned. In my view, they would hold, as did the courts in Plymouth Rubber and Mister Donut, that the statute of limitations for a fraud claim such as appellants’ does not necessarily begin to run when the plaintiff knows that the defendant has broken his promise. Thus, even if I believed that the majority was applying the correct rule of West Virginia law, I would have to conclude that it was applying that rule incorrectly in holding that appellants’ fraud claim is barred as a matter of law.
III.
The rule of law announced by the court today may well immunize from suit many who have and will in the future defraud the citizens of West Virginia. The more likely consequence of the rule, however, is that every plaintiff alleging breach of contract will also allege fraud in the inducement— whether or not he has facts to support such a claim. If he does not, he risks that the statute will run before he even has reason to suspect he may have been defrauded. This would be unfortunate were it required *1277by West Virginia law; it is all the more unfortunate because it is not.
I respectfully dissent.

. The court in Stemple in fact stated at one point that the statute begins to run when the plaintiff knew or should have known of "the nature of [his] claims." 400 S.E.2d at 564 (emphasis added).

. The majority believes that to require that a plaintiff know or have reason to know that he has been deceived (as opposed to merely injured) is to require that he know that he has a legal claim. See, e.g., ante at 1272 (“The court [in Stemple ] identifies the ‘injury’ as the thing to be discovered, not that the defendant's state of mind or breach of duty may legally entitle the plaintiff to recover damages.”). Of course, this is not so. One can know of possible deception, yet have no idea whether he has a legal claim based upon that deception.

. The majority would have to maintain that Stemple was wrongly decided if it were applying the rule that it' states it is applying.