Virginia Lawyers Weekly VA Lawyers Weekly
Where plaintiff alleges defendants concealed a mold infestation in the house plaintiff bought from them, an “as is” clause in the sales contract does not insulate defendants from a claim of actual fraud in the inducement.
The complaint
Plaintiff alleges that defendants covered up mold in four locations using paint, drawer lining, drywall patches and vinyl flooring.
Plaintiff also alleges that she and her family have suffered health problems, and that she suffers mental distress from “seeing her family become ill.”
Actual fraud
“For their demurrer to Count I, Defendants baldly insist that Plaintiff failed to plead the element of reasonable reliance. They also insist that to state a claim for fraudulent inducement, a plaintiff must allege there had been an ‘actual diversion’ of the purchasers from making the inquiries and examination a prudent buyer ought to make[.] …
“Acknowledging the ‘actual diversion’ requirement to state a claim in the context of a purchase of real property, Plaintiff points to multiple Supreme Court cases finding fraud by sellers concealing material defects. …
“Plaintiff cites Devine v. Buki, 289 Va. 162 (2015), for the proposition that a seller cannot rely upon the ‘as is’ language of contract where a buyer can show the contract was induced by the seller’s fraud.
“‘As a general rule, the burden is upon a purchaser of real property to discover defects. “[A] very important exception to that rule is that the seller must not say or do anything to throw the purchaser off his guard or to divert him from making the inquiries and examination which a prudent man ought to make.”’ Van Deusen v. Snead, 247 Va. 324, 329 (1994)[.] …
“[T]he allegations of the instant complaint are analogous to the averments found sufficient in Van Deusen. … That Defendants may have included an ‘as is’ clause in the contract of sale would not require a contrary conclusion.
In Devine v. Buki, 289 Va. 162, 176 (2015), “the Supreme Court affirmed a judgment against a home seller for fraudulent inducement for concealing damage to the foundation sill despite a disclaimer statement in the contract informing the purchasers that they were buying the home ‘as is[.]’ …
“The Court explained: … ‘[A]seller may not rely upon and claim the benefits of a contract and at the same time through that instrument contract against and relieve himself of the consequences of his fraud that induced the other party. In other words, the entire contract is rescinded including any language indicating that the sale was made ‘as is.’”
Defendants’ demurrer to the actual fraud claim is overruled.
Constructive Fraud
“Defendants urge that the allegation of fraud by concealment are legally inconsistent with a claim of constructive fraud because the former involves an intentional act and the latter involves a misrepresentation made innocently or negligently. …
“‘[C]oncealment, in general, can only give rise to a claim of actual fraud.’ Cohn v. Knowledge Connections, Inc., 266 Va. 362, 367 n.2 (2003)[.] … That is ‘[C]oncealment can give rise to constructive fraud only in cases where there is a duty to disclose the concealed fact.’
“Plaintiff has not alleged the existence of any duty owed by Defendants to disclose the mold infestation of their home.”
Defendants’ demurrer to the constructive fraud claim is sustained.
VCPA
“Defendants demur to Count III on the ground that the VCPA applies only to ‘suppliers’ and Plaintiff has neither alleged that they are suppliers nor any facts from which such could be concluded.
“Plaintiff responds only to say that she has pleaded that Defendants are sellers and a seller is a ‘supplier’ and she does not need to spell it out any further to state a claim. …
“Plaintiff unquestionably has alleged that Defendants are suppliers within the meaning of the VCPA in that they offered for sale and did sell real property for residential use.”
The demurrer to plaintiff’s VCPA claim is overruled.
Intended emotional distress
Defendants demurrer to the intentional infliction of emotional distress. They argue that plaintiff has not sufficiently alleged outrageous conduct and severe emotional distress.
As to whether defendants’ conduct was outrageous, this is best resolved by evidence at trial.
As to whether plaintiff suffered severe emotional distress, in Russo v. White, 241 Va. 23, 25(1991), “the Supreme Court affirmed the sustaining of a demurrer where the plaintiff ff had alleged suffering from nervousness, insomnia, stress, and inability to concentrate, with the Court opining that ‘the alleged effect on the plaintiffs’ sensitivities is not the type of extreme emotional distress that is so severe that no reasonable person could be expected to endure it.’”
The complaint in this case “alleges Plaintiff’s emotional distress to be ‘mental confusion, fatigue, depression, and emotional distress.’ … Plaintiff’s allegations are on par with those found insufficient in Russo.”
Defendant’s demurrer to the intentional infliction of emotional distress is sustained.
Negligent infliction
Plaintiff’s complaint alleges that defendants had a duty to not conceal water leaks and mold, and that they negligently breached this duty to induce plaintiff to buy the house.
“Defendants urge that the claim is barred by the source-of-duty rule. … [T]hey say that the alleged duty to not conceal water leaks and mold growth arose from the parties’ contract and that therefore the NIED claim is attempting to bring a tort action for breach of a contractual duty. …
“The source-of-duty rule does not apply to claims for fraud in the inducement to contract. … As the Supreme Court explained, where the alleged fraud was perpetrated before a contract between the parties came into existence, it cannot logically follow that the duty allegedly breached was one that finds its source in the contract.”
In this case, “the alleged acts of concealment occurred prior to the parties having executed the real estate contract. Accordingly, the contract could not have been the source of the duty allegedly breached by Defendants.”
Defendants’ demurrer to this count is overruled.
Conspiracy
“Starting from the assumption that the court has sustained their demurrer to the other counts, Defendants state that there can be no viable conspiracy claim without an underlying tort.
“Defendants are correct in their statement of law.” However, the court has overruled defendants’ demurrers to claims for fraud in the inducement, violation of VACA and negligent infliction of emotional distress.
As a result, the demurrer to the conspiracy claim is overruled.
DeLeon v. McGaha, Case No. 21005669-00, Feb. 1, 2022, 20th Circuit Court (Carson). Ira S. Saul, John C. Altmiller for the parties. VLW 022-8-006, 12 pp.
