Fraud – Fraud and business conspiracy claims barred by source-of-duty rule

Where a company’s fraud and business conspiracy claims arose out of a contractual relationship, and the resulting damages were the same for the breach-of-contract and tort claims, the tort claims were barred by the source-of-duty rule.

Background

James River Petroleum Inc. sued Precision & Performance Auto Care LLC, or P&P, Leon Blount, Richard Walker Logistics LLC, or RW Logistics, Richard Walker, SS&B Distributor LLC and Sharon Britt. The trial court found in favor of James River on its claims for breaches of contract, fraud, tortious interference with a contract and business conspiracy.

Continuance

The day before trial, the appellants made a motion for a continuance so they could hire a different attorney. The morning of the scheduled trial, Blount stated their attorney had not been in contact with them for six months. Defense counsel stated that his clients were “not ready to go forward” due to their dissatisfaction with him. Even so, counsel explained that he was prepared to present “the best defense that they ha[d] available.” James River opposed the requested continuance. The trial court refused to continue the case.

To prevail on appeal, the complaining party must demonstrate both an abuse of discretion and prejudice. This case was pending for about 11 months before trial. The scheduling order was entered more than three months prior to trial, and the parties received notice of the trial date. As such, they had “ample opportunity” to hire new counsel before trial. Under these circumstances, the trial court did not abuse its discretion by denying the motion to continue.

Source of duty

The appellants argue that the fraud and business-conspiracy claims are barred under the source-of-duty rule. This court agrees.

There is no question that using the credit cards to buy nonexistent goods and services constituted an affirmative wrongdoing. However the parties’ relationship to James River was solely contractual. Although the misrepresentations were not based on a duty that was encompassed by the contract terms, James River incurred damages solely because of the breaches of contract. The damages were the same for the breach-of-contract and tort claims. Taken together, these considerations compel application of the source-of-duty rule to bar the tort claims here that arise out of the breaches of contract. For these reasons, the trial court erred by denying the appellants’ motion to modify the relevant provisions of the final order.

Blount stands in a slightly different posture than Walker because, unlike Walker, he did not personally guarantee the contract with James River. Even so, “an agent acting within the contractual scope of employment shares its principal’s legal identity.” Based on this shared identity, the source-of-duty rule applies equally to a business entity that has entered into a contract and its agents acting within the scope of their employment. So the source-of-duty principle bars the claims for fraud and business conspiracy against Blount.

Business conspiracy

The business-conspiracy claims against SS&B and Britt fail because the tort for business conspiracy requires more than one conspirator and cannot be established by showing a conspiracy to breach a contract, unless the breach involved an independent duty.

Sufficiency

The appellants argue that the trial court should have struck the tortious-interference claims for lack of proof that SS&B and Britt caused nonpayment by P&P Auto Care or RW Logistics. The court disagrees.

Positive evidence showing the invalidity of the invoices included the pattern of the charges, the repetitive nature of the charges and the testimony of James River’s CFO that certain charges were incredible based on the impossibility of the variations—or lack thereof—in the fuel prices charged. Based on the pattern of spending and the pattern of the payments made to SS&B and Britt’s other business entity (Precision and Performance Auto), a reasonable factfinder could determine by a preponderance of the evidence that Britt, through SS&B, misrepresented the goods and services provided to P&P Auto Care and RW Logistics.

Burden

The appellants argue that the trial court erred by placing the burden on them to prove that goods and services were actually exchanged. This court disagrees. The record taken as a whole reflects that the trial court found that James River proved by a preponderance of the evidence that the appellants worked together to make purchases on the cards for nonexistent goods and services. The court then simply noted that the appellants had not disproved that finding.
Affirmed in part, reversed in part, and remanded.

Precision & Performance Auto Care, LLC v. James River Petroleum, Inc., Record No. 0846-25-2, May 12, 2026. CAV (Decker). From the Circuit Court of Hanover County (Harris). Spencer M. Cox (Michael H. Brady; P. Thomas DiStanislao; Whiteford, Taylor & Preston L.L.P., on briefs), for appellants. J.P. McGuire Boyd, Jr. (Williams Mullen, on brief), for appellee. VLW 026-7-187. 18 pp.

Full-Text Opinion
VLW 026-7-187