Construction Law Insights

Suits v. Stephen Alexander Homes, LLC, 2018 Va. Cir. LEXIS 29 (Cir. Ct. City of Chesapeake Feb. 27, 2018)

Plaintiffs alleged defects in a home constructed for them by Defendant. Plaintiffs noticed defects a few days after closing and the contract included a warranty of completion and an express one-year warranty. The complaint contained counts alleging breach of contract, breach of warranty, fraud, constructive fraud, negligence in supervision of the project, and violation of the Virginia Consumer Protection Act (“VCPA”). Defendant demurred to all counts of the complaint, except for breach of contract and breach of warranty.

Defendant argues that the parties’ relationship is defined by contract, therefore Plaintiffs are only entitled to recover for breach of said contract pursuant to the source of duty rule. Furthermore, Defendant maintains that that the economic loss doctrine applies to parties in privity, and precludes Plaintiffs from recovering in negligence, as the complaint alleges only disappointed economic expectations regarding the value of the contracted-for property itself.

The court held that for a plaintiff to recover for negligence in instances of an accompanying contractual breach, there must exist an independent tort duty. The Plaintiff has not alleged a sufficient independent tort duty of care separate from the parties’ contract in this case. The court further concluded that the economic loss doctrine prohibited Plaintiffs from recovering on the negligence count because the losses suffered as a result of the negligent defective construction are economic in nature and impact only the contracted-for home, not the plaintiffs themselves.

Defendant claimed Plaintiffs failed to allege facts sufficient to support a claim for actual fraud or constructive fraud because the alleged misrepresentations related to duties arising under the contract and warranties, the allegations had not been pleaded with specificity, and they were insufficient to support a claim. Furthermore, every alleged misrepresentation was made after closing on the home.

The court agreed with Defendant, ruling that the alleged statements were not pleaded with the necessary specificity, or were not allegedly made before the parties entered into the contract. Additionally, the complaint did not truly plead reliance on the allegedly fraudulent statements or damage resulting therefrom.The court sustained Defendant’s demurrer regarding the violation of the VCPA with leave to amend. It held that, while the complaint alleged numerous misrepresentations made by Defendant following closing on the subject home, it did not contain the requisite particularity with regard to the alleged statements, or resulting damages.

PLDR Law Mark Burgin 1 PLDR Law Scott Kowalski 1 Wolf Tom v2 Stout Kenneth 2016

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