I’ve discussed the Virginia Consumer Protection Act (VCPA) and the interaction between fraud and contract on numerous occasions here at Construction Law Musings. A recent case from the Eastern District of Virginia District Court discusses this interaction (along with that dreaded default) further.
In Bhutta v. DRM Construction Corp., the homeowners, the Bhuttas, sued DRM for breach of contract, conversion, fraud, and a violation of the VCPA. These allegations were based upon DRM having taken a $40,000.00 deposit from the Bhuttas and then failing to even begin work. As you may have guessed from the title of this post, DRM did not respond to the Complaint and the Court granted default. The Court then took up the question of whether the Bhuttas had alleged enough on each count for default judgment on those counts. After going through a procedural recitation and finding that DRM was properly served and that the Court had jurisdiction, the Court got to the meat of the matter.
The Court held that the Bhuttas properly plead a breach of contract for the obvious reason. The reason was that DRM never performed any work and the Bhuttas were damaged because they both paid the deposit and also had to hire another contractor to complete the work at a higher price. The Court granted default judgment for breach of contract.
On the conversion count, the Court found for the Bhuttas because the Bhuttas had properly pleaded that they provided the $40,000.00, and then when it became clear that DRM had no intention of moving forward on the project, they demanded the money back to no avail. The Court further found that DRM even acknowledged that the Bhuttas were entitled to return of the deposit but still failed to return it. The Court granted default judgment on this count as well.
After going through the source of duty and economic loss cases relating to the interaction of fraud and contract, the Court then looked at the fraud allegations by the Bhuttas. After review of the pleadings (remember, DRM defaulted and therefore could not defend) the Court determined that the Bhuttas had not pleaded enough to get a judgment for fraud. The Court found that the bare allegation that DRM never intended to perform without more did not meet the standard set forth in the case law. I recommend this portion of the opinion for its good discussion of the various cases relating to fraud and contract.
The Court also found that the bare bones “black letter” recitation of the legal standard under the VCPA without more to link the allegations of the Complaint to those standards was insufficient to allow for default judgment. The Court specifically called out the failure to plead how the construction claim involved a “consumer transaction,” and the failure to articulate how the actions of DRM employed the use of “deception, fraud, false pretense, false promise, or misrepresentation.” In short, the Court wanted more “meat on the bone.”
Finally, because the contract between the Bhuttas and DRM did not contain an attorney fees provision and the VCPA count was found lacking, the Court did not award attorney fees. The Court also invited the Bhuttas to replead the final two counts if they could plead further facts to meet the Court’s objections.
The takeaway here, aside from a good discussion of the law that I recommend to your reading, is that just because you get a default does not necessarily mean you get all of the relief requested. You should always have an experienced Virginia construction attorney help you assure that you plead all of the facts and law that will allow a full judgment should the defendant fail to appear.
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