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Plaintiffs can often assert more than one legal theory of recovery
with the hope of prevailing on at least one of them.
In the context of construction litigation, an aggrieved contractor
could file suit for breach of contract, unjust enrichment
and, in some cases, fraud. When these several counts
are pled in the same law suit, the question becomes whether
any of these claims contradict or exclude the other. For example,
in many jurisdictions, a plaintiff cannot sue for
breach of a written contract and for unjust enrichment (to
recover the value of work performed in the absence of a
contract). The issue of contradictory claims was highlighted
by the Supreme Court of Virginia in the case of Dunn Construction
Co. v. Cloney, 2009 Va. LEXIS 81.
In Dunn, Dunn Construction Co. (“Dunn”) entered into a
contract with Richard Cloney (“Cloney”) for the partial construction
of a residence, except for some interior finishes.
Under the contract, Dunn was required to perform all work
in a “workmanlike manner according to standard practices.”
During the course of the project, Dunn failed to build the
front foundation wall in accordance with the Virginia building
code. The wall began to crack and bow. Dunn eventually
agreed to fix the problem by using rebar and filling-in the
cinderblocks with a concrete mix. In taking corrective action,
however, Dunn used a single bar every few feet and
only partially filled the cinderblock cell with concrete. During
a routine inspection, Dunn told the county inspector that
the wall had been fortified with rebar and concrete, but
failed to disclose the extent to which Dunn had used these
materials.
After a dispute arose regarding final payment, Cloney ultimately
agreed to remit final payment in exchange for
Dunn’s written 10-year guarantee of the wall’s stability and
Dunn’s assurances that it had placed rebar in each cinderblock
cell and that concrete had been filled to the top of the
wall. After a subsequent inspection of the wall, however, it
was confirmed that Dunn had neither filled each cell with
concrete nor used rebar as he described.
Several months later, Cloney filed a complaint against Dunn
in Mecklenburg County Circuit Court asserting several
causes of actions, including breach of contract, negligence
and fraud. After a jury trial, Cloney was awarded
$33,823.27 in compensatory damages and $25,000.00 in
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punitive damages. The award of punitive damages was based
upon the finding that Dunn had committed fraud by misrepresenting
the extent to which he repaired the retaining wall.
Dunn then appealed to the Supreme Court of Virginia. The
precise issue before the Court was whether there was enough
evidence at trial to permit the finding of fraud independent of
the construction contract.
The Supreme Court held there was not enough evidence and
it reversed the jury award. In doing so, the court discussed
general principles of damages for breach of contract. Specifically,
it held that damages for breach of contract are limited
to the actual loss sustained by the plaintiff; that is, punitive
damages for breach of contract were not permitted. Furthermore,
to recover in tort (i.e., fraud or negligence), there must
have been evidence that the defendant (Dunn) breached a
common law duty it owed to the plaintiff (Cloney). A tort
claim cannot be maintained by alleging a breach of a duty
that exists only by virtue of a contract between the parties. As
applied in this case, the court found that Dunn’s false statements
regarding the retaining wall breached only a duty
which arose from the contract. As such, Cloney’s claim for
fraud could not stand under the facts presented at trial.
continued on page 2
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