Home / Opinion Digests / Actual fraud claim survives demurrer

Actual fraud claim survives demurrer

Where defendant did not reconvey property to plaintiff as agreed, plaintiff’s allegation that defendant never intended to do so sufficiently states a claim for actual fraud but not constructive fraud.


Plaintiff Gutterman purchased residential real estate for $93,500 without obtaining a loan. Several years later, she was notified of $13,866 in delinquent property taxes on the parcel and an impending tax sale. Gutterman meet with defendant Sgueglia, a licensed real estate agent and broker. Gutterman alleges that Sgueglia offer to pay the back taxes if Gutterman would temporarily transfer the property to her and pay rent to her for three years. At the end of three years, Sgueglia would transfer the property back to Gutterman.

In September 2015, Gutterman executed a deed and transferred the property. Sgueglia paid the back taxes. The land record cover sheet stated that Sgueglia had a $145,000 assumption balance, the assessed value of the property, but there was no underlying lien or deed of trust obligating her to that amount.

In October 2015, the parties executed a three-year lease that provided Gutterman’s rent would be $50 per month for the first year, $750 per month for the second year and $1,500 per month for the third year, though this was later reduced to $975 per month.

Before the lease expired Sgueglia sent Gutterman a notice of nonrenewal, seeking to dispossess Gutterman of the property. Gutterman filed a district court action, asserting Sgueglia did not own the property due to her fraud. Sgueglia countered with an unlawful detainer action and apparently still owns the property.

Gutterman then filed a complaint in this court, alleging Sgueglia committed actual and constructive fraud. Sgueglia filed a demurrer, seeking to dismiss both counts.

Actual fraud

Accepting Gutterman’s allegations as true, she has stated a claim for actual fraud. “Actual fraud requires that the defendant knowingly and intentionally misrepresent a material fact with the intent to mislead and that the plaintiff rely on that misrepresentation to her detriment. …

“Sgueglia’s statements regarding the transfer of the Property qualify as representations of material fact because they formed the basis of the agreement. … Further, Gutterman alleges in the Complaint that when Sgueglia made those representations, Sgueglia knew that they were false and that they were intended to cause Gutterman to permanently transfer the Property.

“Assuming these statements are true, Sgueglia made false representations of future action intentionally and knowingly. … Gutterman also alleges that she relied on the representations when she executed the deed and asserts that she is the true owner of the Property. Gutterman relied on Sgueglia’s representations and consequently suffered harm, as she no longer holds title to the Property. …

“A statement regarding future action or events generally cannot support a claim for fraud; however, if a defendant makes a promise with the contemporaneous intent not to perform the promise, the statement can support an actual fraud claim. … The Court finds that Gutterman’s allegation in the Complaint that Sgueglia made representations she knew at the time were false constitutes a misrepresentation of present fact sufficient to support an actual fraud claim.”

The demurrer is overruled as to the actual fraud claim.

Constructive fraud

Gutterman has not sufficiently alleged a constructive fraud claim. “A constructive fraud claim requires that a defendant innocently or negligently make a false statement of a material fact and that the plaintiff rely on the misrepresentation to her detriment.”

However, the Virginia Supreme Court has ruled that alleged misrepresentations referring to future actions are insufficient to support a constructive fraud claim. If this were not so, the Court observed, “every breach of contract would potentially give rise to a claim of constructive fraud.”

The demurrer is sustained with respect to the constructive fraud claim.

Gutterman v. Sgueglia. Case No. CL19-772, June 10, 2019; Norfolk Cir. Ct. (Lannetti). Gregory L. Sandler, Albert, R. Hartley, Ryan D. Sawyer for the parties. VLW 019-8-053, 7 pp.

VLW 019-8-053

Virginia Lawyers Weekly