Schur v. Sprenkle

84 Va. Cir. 418, 2012 WL 7985730, 2012 Va. Cir. LEXIS 132
CourtRichmond County Circuit Court
DecidedApril 11, 2012
DocketCase No. CL10-4495
StatusPublished
Cited by1 cases

This text of 84 Va. Cir. 418 (Schur v. Sprenkle) is published on Counsel Stack Legal Research, covering Richmond County Circuit Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Schur v. Sprenkle, 84 Va. Cir. 418, 2012 WL 7985730, 2012 Va. Cir. LEXIS 132 (Va. Super. Ct. 2012).

Opinion

By Judge Melvin R. Hughes, Jr.

The court on March 19, 2012, took evidence consisting of the testimony of the parties and heard argument on Defendant’s plea of the statute of limitations to Count I alleging Fraud, Fraudulent Concealment, and Fraudulent Inducement as well as Defendant’s demurrer to that count and the remaining ones in Plaintiff’s First Amended Complaint. Plaintiff alleges that Defendant induced him to invest in an L.L.C. talent-management company with lies and misrepresentations, leaving him out of pocket of at least $82,053.67. Plaintiff alleges that, instead of spending the funds on legitimate business transactions, Defendant misappropriated them for personal expenses and other unauthorized transactions. With leave granted, Plaintiff filed a First Amended Complaint, which displaced the original Complaint. The First Amended Complaint, as was the original, consists of about thirty pages and is a long, rambling recitation of the parties’ dealings [419]*419and the claims Plaintiff identifies to them. Each side’s position and the court’s decision on each count is as follows.

Count I: Fraud, Fraudulent Concealment, and Fraudulent Inducement

A. Plea of the Statute ofLimitations

Defendant invokes Va. Code § 8.01-243 contending that the two-year limit for filing this count expired before Plaintiff filed suit on October 22, 2010. Defendant relies on the discovery rule governing accrual, which states that a cause of action for fraud accrues “when such fraud ... is discovered or by the exercise of due diligence reasonably should have been discovered.” Va. Code § 8.01-249(1) (emphasis added).

Defendant argues that Plaintiff’s allegations demonstrate that the alleged fraud could have reasonably been discovered with due diligence beginning in June 2008 before Plaintiff invested in Black Water Management, L.L.C., the company Plaintiff says was organized as an L.L.C. with the parties as co-managing members. Specifically, Plaintiff alleges that “[i] n the beginning of June 2008, [Plaintiff] asked [Defendant] for complete documentation pertaining to [Defendant’s] representations.” This refers to contracts Plaintiff alleges Defendant had with an identified musician and a music group and documents showing Defendant had spent $71,230.51 in his existing music-talent business that would represent Defendant’s contributions to their anticipated joint business. (PL’s Compl. ¶¶ 13-17.)

Defendant cites White v. Potocska, 589 F. Supp. 2d 631, 642 (2008), stating that, in a fraud case, a Plaintiff must show that he relied on the representations of another, and where one makes his own investigation into the subject matter, whether complete or not, he may not say that he relied on the representations. Plaintiff counters that he did not conduct an investigation and that White is inapposite because White involved the purchase of a business in an arms-length transaction; here, the parties should be considered promoters, those who undertake to form a corporation and to procure for it rights, instrumentalities, and capital to carry out the business. As promoters, Plaintiff argues, the parties owe each other fiduciary duties. Therefore, Plaintiff claims he was entitled to place trust in the Defendant. The court disagrees.

“[T]o establish fraud, it is essential that the defrauded party demonstrates the right to reasonably rely upon the misrepresentation.” American Sur. Co. v. Hannah, 143 Va. 291, 301, 130 S.E. 411, 414 (1925). Furthermore, the reliance must be justifiable.

It is essential . . . that the party addressed should trust the representation and be so thoroughly induced by it that Judging [420]*420from the ordinary experience of mankind, in the absence of it he would not, in all reasonable probability, have entered into the contract or other transaction.

Id. (emphasis added).

Due diligence requires the Plaintiff to act with “such a measure of prudence, activity, or assiduity, as is properly expected from, and ordinarily exercised by, a reasonable and prudent man under the particular circumstances.” STB Mktg. Corp. v. Zolfaghari, 240 Va. 140, 144, 393 S.E.2d 394, 397 (1990). Thus, “[t]he reliance alleged by the Plaintiff must be objectively reasonable.” Metrocall of Del. v. Continental Cellular Corp., 246 Va. 365, 374, 437 S.E.2d 189, 193-94 (1993) (emphasis added).

Here, Plaintiff, by his own statement, admits that he asked Defendant for “complete documentation pertaining to [Defendant’s] representations.” (Pl.’s Compl. ¶ 14.) Plaintiff goes on to state that, even though Defendant was not immediately forthcoming with such information, he wrote two initial checks totaling $49,675, and later others, providing all the funds for their proposed business venture he now seeks to recover from Defendant. (Pl.’s Compl. ¶¶ 14-17.)

It is difficult to characterize Plaintiff’s allegations of trust in Defendant as objectively reasonable given that no long-running personal history of acquaintanceship or any track record of doing business together is alleged or otherwise stated in the testimony and even considering the parties were fiduciaries as Plaintiff contends. Plaintiff testified that he met Defendant by a referral or introduction through a third party before their proposed joint venture. Thus, when Plaintiff sought “complete documentation” from Defendant in June 2008, such as the alleged signed contracts with the identified musicians, Plaintiff sought the documented proof from the Defendant for his own assurances. Nonetheless, Plaintiff provided money to Defendant without the requested proof of the contracts and other documentations alleged, stating that he did “not conduct any investigation into [Defendant’s] representations at that time, [taking] [Defendant] at his word.” (PL’s Compl. ¶ 16.)

Finally, Plaintiff argued during the hearing that the question of justifiable reliance is a question of fact for the jury, not a question of law for the court. The court disagrees. Courts have dismissed fraud claims based on the above analysis during the demurrer stage or its equivalent. See Schmidt v. Household Fin. Corp., II, 276 Va. 108, 166, 661 S.E.2d 834, 838 (2008). Thus, there being no allegation that Plaintiff could not have discovered the fraud any sooner than the two-year allotted time immediately preceding the filing of the action, the claims are time-barred under the provisions of Va. Code §§ 8.01-243, 8.01-249.1.

[421]*421B. Demurrer

The court need not address the fraud count for purposes of the demurrer.

Count II: Wrongful Conversion

Defendant contends that the Demurrer to this count should be sustained because Plaintiff has no standing to sue for conversion because the funds alleged to have been converted belonged to the business entity after Plaintiff wrote four checks payable to the entity, which was operating either as a partnership or a limited liability company. Plaintiff contends that, under Va.

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Cite This Page — Counsel Stack

Bluebook (online)
84 Va. Cir. 418, 2012 WL 7985730, 2012 Va. Cir. LEXIS 132, Counsel Stack Legal Research, https://law.counselstack.com/opinion/schur-v-sprenkle-vaccrichmondcty-2012.