Submitted:
May 21, 2002
Filed: June 19, 2002
Norman T. Daniels, Jr., Esq.
Michael
G. Gallaway, Esq.
Carl L. Fletcher, Jr., Esq.
Burns,
White & Hickton, LLC
Daniels Law Firm, P.L.L.C.
Wheeling,
West Virginia
Charleston, West Virginia
Robert
J. Ray, Esq.
Attorneys for the Appellants
Burns,
White & Hickton, LLC
Pittsburgh,
Pennsylvania
Charles
M. Johnstone, III, Esq.
Thaxton
& Johnstone, L.L.P.
Charleston,
West Virginia
Attorneys
for Appellee ZMM, Inc.
Fred
Adkins, Esq.
J.
H. Mahaney, Esq.
Michael
S. Bailey, Esq.
Huddleston,
Bolen, Beatty,
Porter & Copen
Huntington,
West Virginia
Attorneys
for Appellee Chapman
Technical Group, Ltd.
Mark A. Swartz, Esq.
Crystal S. Stump, Esq.
Susan M. Murray, Esq.
Swartz & Stump, L.C.
Charleston, West Virginia
Attorneys for Appellee
The H.C. Nutting Co.
James R. Snyder, Esq.
Jackson & Kelly, P.L.L.C.
Charleston, West Virginia
Carol A. Joffe, Esq.
Winston & Strawn
Washington, D.C.
James F. Lee, Jr., Esq.
Lee & McShane, PC
Washington, D.C.
Attorneys for Appellee DMJM/HTB, Inc.
The Opinion of the Court was delivered PER CURIAM.
2. “A
motion for summary judgment should be granted only when it is clear that there
is no genuine issue of fact to be tried and inquiry concerning the facts is
not desirable to clarify the application of the law.” Syllabus Point 3,
Aetna Cas. & Sur. Co. v. Federal Ins. Co. of N.Y., 148 W.Va. 160,
133 S.E.2d 770 (1963).
3. “The
'discovery rule' is generally applicable to all torts, unless there is a clear
statutory prohibition of its application.” Syllabus Point 2, Cart v.
Marcum, 188 W.Va. 241, 423 S.E.2d 644 (1992).
4. “In
tort actions, unless there is a clear statutory prohibition to its application,
under the discovery rule the statute of limitations begins to run when the plaintiff
knows, or by the exercise of reasonable diligence, should know (1) that the
plaintiff has been injured, (2) the identity of the entity who owed the plaintiff
a duty to act with due care, and who may have engaged in conduct that breached
that duty, and (3) that the conduct of that entity has a causal relation to
the injury.” Syllabus Point 4, Gaither v. City Hospital, Inc., 199
W.Va. 706, 487 S.E.2d 901 (1997).
5. “The
essential elements in an action for fraud are: (1) that the act claimed to be
fraudulent was the act of the defendant or induced by him; (2) that it was material
and false; that plaintiff relied upon it and was justified under the circumstances
inrelying upon it; and (3) that he was damaged because he relied upon it.”
Syllabus Point 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66 (1981).
6. “Though
a purchaser may rely upon particular and positive representations of a seller,
yet if he undertakes to inform himself from other sources as to matters easily
ascertainable, by personal investigation, and the defendant has done nothing
to prevent full inquiry, he will be deemed to have relied upon his own investigation
and not upon the representations of the seller.” Syllabus Point 5, Jones
v. McComas, 92 W.Va. 596, 115 S.E. 456 (1922).
7. “It is not necessary that the fraudulent representations complained of should be the sole consideration or inducement moving the plaintiff. If the representations contributed to the formation of the conclusion in the plaintiff's mind, that is enough[.]” Syllabus Point 3, in part, Horton v. Tyree, 104 W.Va. 238, 139 S.E. 737 (1927).
Per Curiam: In this appeal of a January
25, 2001 order from the Circuit Court of Kanawha County, the appellants contend
that the circuit court improperly granted summary judgment to the appellees.
After careful consideration of the record, we find genuine issues of material
fact exist for jury resolution, and reverse the circuit court's order.
The instant case arises from
the construction of a Job Corp facility for the United States Department of
Labor (“the DOL”) in Charleston, West Virginia. The DOL hired appellee
DMJM/HTB to select a site for the facility, and in turn DMJM/HTB chose appellee
ZMM, Inc., to be the architect for the facility. ZMM, Inc., then contracted
with appellees Chapman Technical Group, Ltd., and The H.C. Nutting Company to
perform various civil and geotechnical engineering of the site.
Once a site was chosen and plans
crafted for the construction of the facility, bid documents were prepared by
the appellees so that contractors and subcontractors could estimate their costs.
As the lowest bidder on the government project, appellant Trafalgar House Construction,
Inc. (“Trafalgar House”) was hired as the general contractor for the
project. Trafalgar House subcontracted the task of moving rock, dirt and otherwise
preparingthe site for construction to appellant Kimberly Industries, Inc. (“Kimberly”),
which also relied upon the bid documents in preparing its estimate.
The dispute between the parties
is a result of alleged errors contained in the bid documents, primarily regarding
the amounts of dirt and of rock needed to complete the preparation of the
site.
In April 1995, Kimberly began
excavating portions of the site and discovered significant amounts of “uncontrolled
fill,” material which could not support the construction of the buildings.
Kimberly was required by the DOL to remove the unacceptable uncontrolled fill,
dispose of it, and replace it with acceptable engineered fill. Approximately
88,000 cubic yards of material was removed, and an off-site mine was established
so that 88,000 cubic yards of engineered fill could be imported.
Also, while the bid documents
estimated that 27,000 cubic yards of rock would be needed to complete the
project, Kimberly discovered that 46,000 cubic yards of rock were actually
needed. Furthermore, while 27,000 cubic yards of rock were available on the
site, Kimberly discovered that only 10,000 cubic yards were usable; the remainder
was of poor quality and had to be removed from the site as waste. Kimberly
was required to set up an off-site quarry and mine 36,000 cubic yards of rock
to be imported for use at the site.
Kimberly argues that it incurred nearly $5 million in additional costs excavating and replacing the uncontrolled fill and in importing usable rock fill. As early as July 1995, both Trafalgar House and Kimberly were retaining engineering firms and
attorneys to investigate methods to recover the additional costs incurred. Both appellants sought to determine why the bid documents prepared by the appellees misrepresented the actual conditions discovered under the surface of the construction site, and sought to establish the extent to which subsurface conditions differed from those portrayed in the bid documents so as to support a claim for additional compensation under the contract.
On April 5, 1996, Kimberly
filed a “Request for Equitable Adjustment” with the DOL to obtain
additional compensation under its contract. The Request for Equitable Adjustment
alleged a “Type I” condition existed at the site, that is, that
the on-site subsurface conditions varied materially from those indicated in
the plans and other bid documents. Kimberly asserted that the additional costs
“stem[med] from differing site conditions or defective specifications
regarding the anticipated soils on the project.”
In order to litigate its Request
for Equitable Adjustment claim with the DOL, Kimberly filed a Freedom of Information
Act request in August 1996. The DOL did not respond to the Freedom of Information
Act request until December 1996, and then only produced a few documents. In
fact, the DOL did not rule on the Request for Equitable Adjustment until 1999.
In April 1997, two years after beginning construction, appellant Kimberly sued appellant Trafalgar House to recover the additional costs of construction. Using the authority of the court, during March and April 1998 the appellants subpoenaed all of the plans and other project documents from the DOL and the appellees.
The appellants assert that on or about April 15, 1998, in the thousands of pages of documents they received in response to the subpoenas, they discovered that the appellees knew before construction began that there would be shortages of dirt and rock on the site, but deleted references to those shortages from bid documents that were provided to the appellants. The appellants inferred from the documents that the appellees knew there would be a shortage of usable material, but concealed that knowledge in an attempt to shift the cost of those shortages onto unsuspecting contractors such as the appellants. Shortly thereafter the appellants
settled their dispute with each other, and on July 1, 1998, filed the instant
suit against the appellees. The appellants asserted that the appellees had fraudulently
and/or negligently misrepresented the site's adverse subsurface conditions in
the bid documents.
After substantial discovery, the appellees filed motions for summary judgment. The appellees first argued that under the statute of limitation, the appellants had two years from the date their cause of action was discovered to file a lawsuit. Citing to documents from the appellants' files, the appellees argued that during 1995, and certainly as late as the April 5, 1996 Request for Equitable Adjustment, the appellants knew that the plans and bid documents prepared by the appellees were “defective” and had “misrepresented” site conditions. The appellees therefore argued that the appellants' July 1, 1998 action was barred by the statute of limitations.
Additionally, the appellees contended that the appellants had conducted their own investigation of the site before bidding on the contract, and had even disregarded calculations of rock and dirt made by the appellees in favor of their own. In other words, the appellees argued that even if they made fraudulent misrepresentations of the site conditions, the appellants did not rely upon those representations. In an order dated January 25,
2001, the circuit court agreed with the appellees. The order concluded that
the appellants knew, no later than April 5, 1996, that the appellees had failed
to disclose important information in the bid documents, such that the documents
“misrepresented” the site conditions. The circuit court therefore
held that the appellees' action for fraudulent or negligent misrepresentation
was barred by the statute of limitation. Additionally, the circuit court concluded
that the appellants had conducted an independent investigation of the site,
and had therefore not relied upon any representations contained in the bid documents
prepared by the appellees.
This appeal by the appellants
followed.
We review a circuit court's
order granting summary judgment de novo. Syllabus Point 1, Painter
v. Peavy, 192 W.Va. 189, 451 S.E.2d 755 (1994).
In reviewing summary judgment,
this Court will apply the same test that the circuit court should have used
initially, and must determine whether “it is clear that there is no genuine issue of fact to be tried and inquiry concerning the facts is
not desirable to clarify the application of the law.” Syllabus Point
3, Aetna Casualty & Surety Co. v. Federal Insurance Co. of New York,
148 W.Va. 160, 133 S.E.2d 770 (1963). As with the circuit court, we “must
draw any permissible inference from the underlying facts in the light most
favorable to the party opposing the motion,” that is, the appellant.
Painter v. Peavy, 192 W.Va. at 192, 451 S.E.2d at 758.
“The circuit court's
function at the summary judgment stage is not to weigh the evidence and determine
the truth of the matter but to determine whether there is a genuine issue
for trial.” Syllabus Point 3, Painter v. Peavy. “Summary
judgment should be denied 'even where there is no dispute as to the evidentiary
facts in the case but only as to the conclusions to be drawn therefrom.'”
Williams v. Precision Coil, Inc., 194 W.Va. 52, 59, 459 S.E.2d 329,
336 (1995), quoting Pierce v. Ford Motor Co., 190 F.2d 910,
915 (4th Cir.), cert. denied, 342 U.S. 887, 72 S.Ct. 178, 96 L.Ed.
666 (1951).
The appellants challenge the
circuit court's summary judgment order on two grounds. First, they contend
that genuine issues of material fact can be inferred from the evidence concerning
when they discovered that the appellees allegedly fraudulently or negligently
misrepresented the subsurface conditions of the site.
Under West Virginia law, claims
in tort for negligence, professional negligence, and misrepresentation (fraudulent
or negligent) are governed by a two-year statute of limitation. W.Va. Code, 55-2-12 [1959].
(See footnote 1) The appellant contends that
the running of the two-year limitation period in this case was “tolled”
through the operation of the “discovery rule.” Under the discovery
rule, a statute of limitation is tolled and does not begin to run until a
claimant knows or by reasonable diligence should know of his claim. Syllabus
Point 1, Cart v. Marcum, 188 W.Va. 241, 423 S.E.2d 644 (1992). “The
'discovery rule' is generally applicable to all torts, unless there is a clear
statutory prohibition of its application.” Syllabus Point 2, Cart
v. Marcum. We clarified the elements a person must show to benefit from
the equitable provision of the discovery rule in Syllabus Point 4 of Gaither
v. City Hospital, Inc., 199 W.Va. 706, 487 S.E.2d 901 (1997):
In tort actions, unless there
is a clear statutory prohibition to its application, under the discovery rule
the statute of limitations begins to run when the plaintiff knows, or by the
exercise of reasonable diligence, should know (1) that the plaintiff has been
injured, (2) the identity of the entity who owed the plaintiff a duty to act
with due care, and who may have engaged in conduct that breached that duty,
and (3) that the conduct of that entity has a causal relation to the injury.
The appellants concede that
they knew in April 1995 that the bid documents “misrepresented” the
actual site conditions. They knew they had an “injury” in the sense
that additional construction costs were incurred because the bid documents,
drafted by the appellees, did not correctly represent the amount of usable rock
available and needed, and the amount of uncontrolled fill.
The appellants argue, however,
that the term “misrepresent” is essentially a term of art in the construction
industry. The appellants contend that everyone involved with the construction
project knew by April 1995 that the bid documents “misrepresented”
the actual site conditions. The appellants argue that it is difficult to accurately
predict, even with extensive pre-construction surveys, what subsurface conditions
of rock and dirt will be like when construction actually begins. Hence, the
appellants' discovery of a difference between the documented and actual conditions
says nothing about when they discovered the conduct _ or misconduct _ of the
appellees in creating the bid documents. The appellants contend they believed,
until April 1998, that had the appellees known of adverse subsurface site conditions
before construction began they would have informed the appellants.
After carefully examining the
record, we agree with the appellants' position. In Syllabus Point 4 of Gaither
v. City Hospital, supra, we established a rule that “tolls the
statute of limitations until a plaintiff, acting as a reasonable, diligent person,
discovers the essential elements of a possible cause of action[.]” 199
W.Va. at 714, 487 S.E.2d at 909. A jury could draw different conclusions from
the appellants' use of the term “misrepresentation” in documents discussing the appellees' bid
documents, and could conclude that the appellants believed the appellees innocently
misrepresented the subsurface site conditions. In other words, questions remain
concerning when the appellants first learned that the appellees fraudulently
or negligently misrepresented their actual knowledge of the subsurface site
conditions.
“In the great majority
of cases, the issue of whether a claim is barred by the statute of limitations
is a question of fact for the jury.” 199 W.Va. at 714-15, 487 S.E.2d
at 909-910. We believe that the instant case presents genuine questions of
material fact regarding whether the appellants' claim is barred by the statute
of limitation. The circuit court therefore erred on this point.
The second issue raised by
the appellants concerns the circuit court's conclusion that the appellants
never detrimentally relied upon the misrepresentations, if any, made by the
appellees.
To establish a claim for fraud
under West Virginia law, a plaintiff must establish three essential elements:
The essential elements in
an action for fraud are: (1) that the act claimed to be fraudulent was the
act of the defendant or induced by him; (2) that it was material and false;
that plaintiff relied upon it and was justified under the circumstances in
relying upon it; and (3) that he was damaged because he relied upon it.
Syllabus Point 1, Lengyel v. Lint, 167 W.Va. 272, 280 S.E.2d 66 (1981).
Fraudulent concealment involves the concealment of facts by one with knowledge
or the means of knowledge, and a duty to disclose, coupled with an intention to mislead
or defraud. Silva v. Stevens, 156 Vt. 94, 589 A.2d 852, 857 (1991).
However, this Court has indicated
that if a plaintiff performs an “independent investigation” of facts
which are “easily ascertainable,” that plaintiff cannot later complain
of detrimentally relying upon fraudulent misrepresentations or concealment
by the defendant. As we indicated in Syllabus Point 5 of Jones v. McComas,
92 W.Va. 596, 115 S.E. 456 (1922), when a plaintiff “undertakes to inform
himself from other sources as to matters easily ascertainable, by personal
investigation, and the defendant has done nothing to prevent full inquiry,
he will be deemed to have relied upon his own investigation and not upon the
representations of the seller.” In accord, Syllabus Point 5, Cordial
v. Ernst & Young, 199 W.Va. 119, 483 S.E.2d 248 (1996).
The “independent investigation”
doctrine is not an absolute defense, and has a “long recognized qualification.”
Cordial v. Ernst & Young, 199 W.Va. at 132, 483 S.E.2d at 261.
As we stated in part in Syllabus Point 3 of Horton v. Tyree, 104 W.Va.
238, 139 S.E. 737 (1927):
It is not necessary that
the fraudulent representations complained of should be the sole consideration
or inducement moving the plaintiff. If the representations contributed to
the formation of the conclusion in the plaintiff's mind, that is enough[.]
We discussed this qualification to the independent investigation doctrine
more fully in Cordial v. Ernst & Young, stating:
The circuit court in the instant
case found that because the appellants performed an independent investigation
and did their own calculations of the amount of fill available on the site,
they could not have relied upon any misrepresentations or misstatements by the
appellees made about the amount of fill on the site. The circuit court therefore
held that the appellants' claims lacked the essential element of detrimental
reliance.
The appellants argue, however,
that they relied upon the absence of any warning by the appellees that there
was inadequate fill on the site to complete the project, and the appellees'
affirmative indications that there was a sufficient amount of material available,
as proof of the accuracy of their own calculations. The appellants argue that
this reliance was reasonable in light of (a) the expertise of the appellees in conducting
site surveys; (b) the fact that the appellees spent more than two years investigating
the construction site and preparing the bid documents; and (c) the appellees'
duty to divulge any anticipated shortage of rock or dirt in the bid documents.
After carefully examining
the record, we agree with the appellants' arguments. The appellees arguably
knew of the true subsurface conditions of the site, and anticipated significant
shortages of rock and dirt. While the appellees' internal documents suggest
there were known problems with the subsurface conditions of the site, the
appellees did not disclose this information to the appellants in the bid documents.
A jury could reasonably conclude
that the appellees concealed facts regarding the subsurface conditions of
the site from the appellees, with a fraudulent intent, facts that the appellees
had a duty to disclose. A jury could also reasonably conclude that, even though
the appellants conducted an independent investigation of the site, the representations
made by the appellees contributed in part to the formation of the conclusion
by the appellants that sufficient quantities of usable rock and dirt existed
on the site to complete the project.
It therefore appears that
genuine questions of material fact exist regarding whether the appellants
reasonably relied upon the allegedly fraudulent representations made by the
appellees. The circuit court therefore erred in granting summary judgment
on this point.