Ballagh v. Fauber Enterprises

PRESENT: All the Justices
DEBRA A. BALLAGH
OPINION BY
v. Record No. 141248 JUSTICE WILLIAM C. MIMS
June 4, 2015
FAUBER ENTERPRISES, INC., ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF LYNCHBURG
F. Patrick Yeatts, Judge
In this appeal, we consider the standard of proof a
plaintiff must satisfy to prevail upon claims alleging
violations of the Virginia Consumer Protection Act, Code §§
59.1-196 to -207 (the “VCPA”).
I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW
In May 2010, Debra A. Ballagh bought a parcel of real
property from Fauber Enterprises, Inc. (“Fauber”). Soon
thereafter, the basement of the house flooded when it rained.
In March 2012, Ballagh filed a complaint against Fauber,
Fauber’s real estate agent, and others. She alleged that the
basement flooded when it rained at least three times while
Fauber owned the parcel. She alleged that Fauber obtained
estimates to waterproof the basement but did not have the work
done. Rather, she alleged, it simply repaired the water
damage.
Ballagh further alleged that she had specifically asked
about water leaks in the basement before buying the parcel.
She alleged that Fauber’s real estate agent assured her,
through her agent, that there were no leaks or water damage.
She alleged that although she waived a professional home
inspection, she and a friend viewed the property and did not
observe any defects in the basement because Fauber had
affirmatively concealed them. She alleged that a professional
home inspection would not have revealed the defects in any
event.
Among other things, Ballagh’s complaint included claims
alleging violations of the VCPA. Specifically, Ballagh claimed
that the defendants had “misrepresented that goods, including
real property, were of a particular standard or quality,” in
violation of Code § 59.1-200(A)(6), and had “used ‘deception,
fraud, false pretense, false promise, or misrepresentation in
connection with a consumer transaction,’” in violation of Code
§ 59.1-200(A)(14).
The case proceeded to jury trial. At its conclusion, the
parties offered competing jury instructions as to the standard
of proof required for the VCPA claims. Ballagh asserted that
the VCPA requires a plaintiff to prove a violation by only a
preponderance of the evidence. The defendants asserted that
because Ballagh’s claims involved alleged misrepresentations,
she was required to prove them by clear and convincing evidence
as required for claims of common law fraud.
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After a hearing, the circuit court agreed with the
defendants. It rejected the jury instructions Ballagh proposed
and gave those proposed by the defendants. The jury returned a
defense verdict. Ballagh moved for a new trial, arguing that
the instructions on the standard of proof were incorrect.
After a hearing, the court denied her motion. It thereafter
entered final judgment on the jury’s verdict.
We awarded Ballagh this appeal.
II. ANALYSIS
In her sole assignment of error, Ballagh asserts that the
circuit court erred by instructing the jury that she was
required to prove her VCPA claims by clear and convincing
evidence, rather than by a preponderance of the evidence. She
argues that the VCPA creates a new, statutory cause of action
that is distinct from and in addition to common law fraud. She
argues that a preponderance of the evidence is the default
standard of proof for statutory causes of action unless the
General Assembly expressly provides for a higher standard. She
argues that the preponderance standard is especially warranted
here because the express language of the statute states that
the General Assembly enacted it with a remedial purpose, and
remedial legislation is to be construed and applied liberally
by the courts.
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Questions relating to burden of proof, including the
standard of proof and which party bears the burden to meet it,
are questions of law reviewed de novo. Mulford v. Walnut Hill
Farm Group, LLC, 282 Va. 98, 111, 712 S.E.2d 468, 476 (2011).
We agree that the VCPA creates a new, statutory cause of
action distinct from and in addition to common law fraud.
Owens v. DRS Auto. Fantomworks, Inc., 288 Va. 489, 497, 764
S.E.2d 256, 260 (2014) (“[T]he legislative purpose underlying
the VCPA was, in large part, to expand the remedies afforded to
consumers and to relax the restrictions imposed upon them by
the common law. . . . Therefore, [it] extends considerably
beyond fraud.”). The elements of the two claims are different.
Wilkins v. Peninsula Motor Cars, 266 Va. 558, 562-63, 582
S.E.2d 581, 587 (2003). In fact, although a plaintiff may not
recover double damages by claiming both a VCPA violation and
common law fraud, he or she may present both claims in the same
action and elect between the damages awarded if both are
proven. Id.
We also agree that “the ordinary burden in civil actions
[is] preponderance of the evidence.” Wyatt v. McDermott, 283
Va. 685, 700, 725 S.E.2d 555, 563 (2012). Accordingly, we
presume that when the General Assembly creates a new, statutory
cause of action, it intends the preponderance standard to apply
unless it expressly states otherwise.
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The defendants argue that there are several indicators
within the VCPA showing that the General Assembly intended a
higher standard of proof to apply, but none of them are express
statements of such intent.
First, the defendants argue that when enacting the VCPA,
the legislature deviated from the language in the model Uniform
Deceptive Trade Practices Act. They cite examples where it
chose to use the words “fraudulent” and “misrepresenting” in
the VCPA in lieu of the phrases “deceptive” and “causes
likelihood of confusion or misunderstanding as to” used in the
model act. Compare Unif. Deceptive Trade Practices Act § 2(a),
9A U.L.A. 14 (Supp. 1967) with Code § 59.1-200(A). They
contend that these deviations from the model act express
legislative intent to conform the statute’s standard of proof
to the standard for common law fraud. We disagree.
The principal source from which to determine the General
Assembly’s intent in enacting a statute is the language it used
in the statute itself. Virginia Dep't of Health v. Kepa, Inc.,
___ Va. ___, ___, 766 S.E.2d 884, 889 (2015). When that
language is not sufficiently clear, we also may consider why
the statute was enacted. Copeland v. Todd, 282 Va. 183, 193,
715 S.E.2d 11, 16 (2011).
The legislature seldom chooses to expressly direct the
courts how to apply a statute. When it does so we must pay
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special attention to that choice and ensure that it is given
full effect. The General Assembly chose to include such
direction in the VCPA. It declared that the VCPA “shall be
applied as remedial legislation to promote fair and ethical
standards of dealing between suppliers and the consuming
public.” Code § 59.1-197. We construe remedial legislation
liberally, in favor of the injured party. E.I. du Pont de
Nemours & Co. v. Eggleston, 264 Va. 13, 17, 563 S.E.2d 685, 687
(2002).
Thus, the General Assembly’s decision to define the
elements of the VCPA using terms of art already familiar to the
bench and bar from common law fraud is insufficient to express
an intent that plaintiffs must prove claims of VCPA violations
by clear and convincing evidence. Despite the defendants’
argument, any light the adoption of such terms may shed on the
standard of proof is eclipsed by the legislature’s express
direction that we apply the VCPA as remedial legislation. That
language supports a conclusion that it intended that we apply
the lower, preponderance standard more favorable to the injured
plaintiff.
Next, the defendants note that Code § 59.1-207 provides an
affirmative defense in certain circumstances, and expressly
provides a preponderance of the evidence standard of proof for
that defense. They argue that this provision would be
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superfluous or redundant if the preponderance standard applied
to the whole VCPA, and such a result would contravene our
canons of statutory construction. See Owens, 288 Va. at 497,
764 S.E.2d at 260.
Although this is a plausible argument, the General
Assembly’s decision to expressly provide a preponderance
standard of proof for a defendant’s affirmative defense is not
an express statement that it intended a clear and convincing
evidence standard to apply to a plaintiff’s VCPA claims. The
implication that the higher standard applies to the plaintiff
because the lower standard applies to the defendant is again
simply too subtle, especially in the face of both the general
presumption that the preponderance standard applies to civil
actions and the rule that remedial legislation is construed in
favor of the injured party.
The defendants also argue that a statute is presumed not
to alter the common law unless the legislature has expressly
indicated otherwise. They argue that allowing a plaintiff to
prove a misrepresentation for the purposes of the VCPA by a
preponderance of the evidence would alter the common law
without such express indication by the General Assembly.
However, as noted above, the VCPA creates a new, statutory
cause of action in addition to common law fraud. It does not
replace or in any way narrow the tort of common law fraud.
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Accordingly, applying the preponderance standard to allegations
of VCPA violations does not alter the common law.
The defendants also argue that the VCPA provides
extraordinary relief, including the possibility of treble
damages, which they contend shows the General Assembly intended
a higher standard of proof to apply. However, many statutes
include similar provisions without imposing a higher standard
of proof. See, e.g., Code §§ 8.01-27.2 (authorizing treble
damages for giving a bad check for rent), 8.01-27.4
(authorizing treble damages for failure to apply insurance
proceeds to unpaid balances for professional services), 18.2-
190.8 (authorizing treble damages for using an unlawful
electronic communication device for commercial advantage or
financial gain), 55-216 (authorizing treble damages for waste
by a tenant of real property), and 56-5 (authorizing treble
damages for damage to property of a public service
corporation). Accordingly, the measure of damages allowed by
the VCPA does not dictate the standard of proof a plaintiff is
required to satisfy.
The defendants also argue that applying the preponderance
standard for VCPA violations would make common law fraud
obsolete because plaintiffs would allege VCPA violations
instead to benefit from the lower standard of proof. However,
as noted above, plaintiffs may, and do, bring claims for a VCPA
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violation and common law fraud in the same complaint. Wilkins,
266 Va. at 559, 587 S.E.2d at 582. While the standard of proof
may be higher for common law fraud, a plaintiff who satisfies
that higher burden and proves punitive damages may recover far
more than merely three times his or her actual damages. See,
e.g., id. at 559, 563, 587 S.E.2d at 582, 584 (upholding a jury
award of $100,000 punitive damages, 56.68 times the award of
$1862.86 in actual damages on a claim of common law fraud).
Accordingly, plaintiffs will pursue claims for common law fraud
despite the lower standard of proof for VCPA violations, where
the evidence supports such claims.
Finally, we note that the highest courts of several states
have concluded that the preponderance standard applies under
their own states’ similar statutes. See, e.g., Aguilar v.
Atlantic Richfield Co., 24 P.3d 493, 521 (Cal. 2001); Service
Rd. Corp. v. Quinn, 698 A.2d 258, 265 (Conn. 1997); Avery v.
State Farm Mut. Auto. Ins. Co., 835 N.E.2d 801, 856 (Ill.
2005); Kelly v. Vinzant, 197 P.3d 803, 812-13 (Kan. 2008);
State v. Price-Rite Fuel, Inc., 24 A.3d 81, 87 (Me. 2011); Hair
Excitement, Inc. v. L'Oreal U.S.A., Inc., 965 A.2d 1032, 1038
(N.H. 2009); Liberty Mut. Ins. Co. v. Land, 892 A.2d 1240,
1247-48 (N.J. 2006); State ex rel. Spaeth v. Eddy Furn. Co.,
386 N.W.2d 901, 903 (N.D. 1986); State ex rel. Redden v.
Discount Fabrics, Inc., 615 P.2d 1034, 1038-39 (Or. 1980);
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Smith v. Baldwin, 611 S.W.2d 611, 616 (Tex. 1980); Poulin v.
Ford Motor Co., 513 A.2d 1168, 1172 (Vt. 1986). The principles
guiding those courts are persuasive.
III. CONCLUSION
For these reasons, we conclude that a plaintiff must prove
a violation of the VCPA by a preponderance of the evidence
rather than by clear and convincing evidence. Accordingly, we
will reverse the judgment of the circuit court and remand the
case for further proceedings consistent with this opinion.
Reversed and remanded.
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