The Virginia Supreme Court handed down fifteen new opinions today. One in particular may be of interest to construction companies.
In Dunn Construction Co. v. Cloney, the Court reversed the trial court’s award of punitive damages against a defendant construction company. The parties had agreed via written contract that Dunn would complete all of the major construction of a house in Mecklenberg County “in a workmanlike manner according to standard practices.” Dunn’s original construction of a front foundation wall was poor, and the wall began to buckle. Dunn thereupon engaged to repair the wall by inserting rebars and concrete, but only in roughly half of the available places. Dunn thereupon represented to Cloney that it had inserted the rebars and concrete in all of the available places. On the basis of that representation and a written promise by Dunn of the wall’s stability for ten years, Cloney paid Dunn pursuant to the contract. Cloney later discovered that Dunn had not performed the promised repairs, and learned that the wall was a catastrophe waiting to happen. Cloney sued, both under contract and for fraud. At trial, the jury awarded Cloney almost all of its compensatory damages plus $25,000 in punitive damages under the fraud count. Dunn appealed the punitive damage award on the basis that Dunn’s actions did not create a tort action separate from the breach of contract action, and since punitive damages are not available for breaches of contract, those damages were improperly awarded.
In an opinion by Justice Lawrence L. Koontz, Jr., the Court unanimously agreed with Dunn. “Dunn’s false representation that he had made adequate repairs . . . related to a duty that arose under the contract,” the Court held. “The fact that the representation was made in order to obtain payment from Cloney does not take the fraud outside of the contract relationship, because the payment obtained was also due under the original terms of the contract.” As a result, since Dunn’s false representations did not violate a common law duty outside of the terms of the written contract itself, Cloney was only eligible for damages under the breach of contract theory of recovery, and could not receive punitive damages. So Dunn saved $25,000, but it is not known how much Dunn spent on appeal seeking that reversal — it may well have been a Pyrrhic victory.
