Where a homebuyer alleged the former owners concealed a serious mold infestation in the house, she can sue for actual fraud in the inducement, despite the presence of an “as is” clause in the sales contract.
Here, said Judge Douglas L. Fleming Jr., the complaint “details the acts of concealment done in each of the affected areas of the home [and] expressly alleges that ‘Plaintiff relied up on Defendants’ joint and several acts of concealment … very much to her detriment.’ … With these averments, the Plaintiff has pleaded a cause of action for actual fraud in the inducement. That Defendants may have included an ‘as is’ clause in the contract of sale would not require a contrary conclusion.”
While the judge allowed the plaintiff to go forward on her actual fraud, Virginia Consumer Protection Act, or VCPA, common law conspiracy, and negligent infliction of emotional distress, or NEID, claims, he sustained the defendants’ demurrer as to her intentional infliction of emotional distress IIED and constructive fraud claims, as well as a demand for punitives in her NIED claim.
Fleming allowed the plaintiff’s claims for attorney fees under the VCPA and costs to stand, and gave the plaintiff 28 days to re-plead the rejected claims.
The decision from the Loudoun County Circuit Court is DeLeon v. McGaha, et al. (VLW 022-8-006).
After buying a home from Paul and Frances McGaha, Pamela J. DeLeon found that it was infested with mold caused by water leaks in the laundry room, two bathrooms, and under the kitchen sink.
According to DeLeon, the sellers fraudulently concealed the mold by covering it up with flooring, drywall patches and paint so that it would not be discovered by prospective buyers.
The plaintiff alleged that she relied on the sellers’ representations, signed a purchase contract with an “as is” clause, and consummated the sale, only to realize later that there was extensive mold damage throughout the house.
She claimed that the mold had caused her and her family to suffer skin rashes, headaches, and other maladies, as well as mental distress.
DeLeon sued. The defendants demurred to the actual fraud in the inducement claim on the grounds that the plaintiff had failed to plead the elements of either reasonable reliance or “actual diversion,” and that the “as is” clause in the purchase contract insulated them from liability for existing defects.
But the judge concluded that “[a]llegations that a seller took affirmative actions designed to conceal defects in a home is sufficient to support the diversion exception.”
DeLeon’s allegations, he found, could establish the equivalent of a “verbal misrepresentation of a material fact, made intentionally to mislead prospective purchasers and to divert them from ‘making the inquiries and examination which a prudent man ought to make.’”
Further, DeLeon’s complaint expressly alleged her detrimental reliance on the sellers’ joint and several acts of concealment.
“With these averments, the Plaintiff has pleaded a cause of action for actual fraud in the inducement,” Fleming concluded.
The judge also found that the claim that the sales contract was procured by fraud “would defeat the effect of any ‘as is’ clause contained therein.”
The VCPA prohibits certain acts by a “‘supplier in connection with a consumer transaction,’ including misrepresenting that goods have certain characteristics.”
The defendants argued the VCPA did not apply because they were not “suppliers.”
But the judge said that under the VCPA, a “supplier” includes a “seller who … engages in consumer transactions,” which are defined as the “sale … or offering for sale … of goods or services to be used primarily for personal, family or household purposes.”
Further, “goods” is defined to include real property.
“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,” Fleming concluded.
To support her IIED claim, the plaintiff argued that the defendants’ conduct was akin to poisoning and that it had caused her “agony” and “misery.”
But the court found that DeLeon’s allegations were insufficient because she did not claim to have sought professional help or that she was “functionally incapable of carrying out any of her work or family responsibilities,” and sustained the demurrer to her IIED claim.
However, Fleming rejected the argument that DeLeon’s NIED claim was barred by the source-of-duty rule, which examines whether the duty the defendant is alleged to have breached arose solely from his contract with the plaintiff or from a common law duty of care.
Here, said the judge the “source-of-duty rule does not apply to claims for fraud in the inducement to contract [because] the alleged fraud was perpetrated before a contract between the parties came into existence[.]”
DeLeon demanded punitive damages for all claims except the VCPA.
The judge overruled the defendant’s demurrer for punitives under the actual fraud claim because intentional tortfeasors are always subject to punitive damage awards. He also concluded that punitives were available for the conspiracy claim because an alleged underlying tort — here, actual fraud — allows punitive damages.
Punitive damages may also be awarded where a defendant’s conduct is “so willful or wanton as to evince a conscious disregard of the rights of others.” To prove this, a plaintiff must show that the defendant was conscious of their conduct and that injury would likely result, but they intentionally engaged in that conduct with reckless indifference to the consequences which produced the injury.
Although DeLeon alleged concealment of the mold infestation, which satisfied the “consciousness of conduct” requirement, Feldman sustained the defendant’s demurrer because the complaint failed to allege that they “were aware of the danger presented by the mold, that personal injury would probably result by them concealing the mold infestation to induce Plaintiff to purchase the home, and that they recklessly decided to proceed notwithstanding that awareness.”
On Feb. 24, DeLeon filed an amended complaint that omitted the IIED claim and re-pleaded the NIED and constructive fraud claims. Defendants filed their answer and demurrer on March 17.
Attorneys for both parties declined to comment based on the ongoing litigation.