United States District Court, E.D. Virginia, Newport News Division
S. DAVIS UNITED STATES DISTRICT JUDGE
matter is before the Court on a 12(b)(6) Motion to
Dismiss filed by Holy Mackerel, Inc. ("Holy
Mackerel') and Daniel Carpenter (collectively,
"Defendants"). Such motion asserts that KCE
Properties, Inc. ("KCE" or "Plaintiff")
failed to state a claim on which relief can be granted in
Count Two of the Complaint. Finding that oral argument is
unnecessary, and for the reasons set forth below,
Defendants' motion to dismiss is DENIED.
instant civil action was filed pursuant to this Court's
diversity jurisdiction and it implicates the laws of the
Commonwealth of Virginia. Compl. ¶¶ 7-8, 38, ECF
No. 1. Plaintiff, as successor in interest to a company that
entered into a lease agreement with Holy Mackerel, is Holy
Mackerel's lessor. Id. ¶¶ 14-16.
Daniel Carpenter is the "owner and corporate officer of
Holy Mackerel." Id. ¶ 13.
terms of the lease specify that, during the pendency of the
lease, Holy Mackerel has the right to remove from the
premises "all fixtures not-affixed to the
building." Id. ¶ 17. The lease further
states that "all built in alterations and improvements
become the property of the Lessor upon termination of the
lease . . . ." Id. The only specified
exceptions are the hostess counter and certain
lessee-purchased kitchen equipment. Id. The lease
provision governing fixtures concludes by stating that
“[a]ny items not removed" during the lease term,
or during an optional 3 0-day extension period, "shall
become property of [KCE]. " Id.
Mackerel gave KCE notice of termination on October 9, 2015
and vacated the premises sometime in December of that same
year. Id. ¶¶ 18-19. At some point in late
2015, Daniel Carpenter allegedly removed numerous fixtures
from the leased premises and caused damage to the premises.
Id. ¶¶ 20-21. Mr. Carpenter then later
allegedly used or sold these fixtures for his own benefit or
for the benefit of Holy Mackerel. Id. ¶ 37. The
Complaint further alleges that Holy Mackerel failed to pay
its full rent for the final three months that it occupied the
rental space. Id. ¶¶ 5, 22.
forth in the Complaint, Plaintiff alleges that Holy Mackerel
breached the lease agreement in various ways (Count One) and
that both Defendants unlawfully converted Plaintiff's
property (Count Two). Defendants jointly filed the instant
motion seeking dismissal of the conversion claim set forth in
Count Two. Defendants further argue that, if Count Two is
dismissed: (1) the request for punitive damages must be
dismissed; and (2) Daniel Carpenter must be dismissed as a
party to the suit. Plaintiff timely filed a memorandum in
opposition to the dismissal motion, and Defendants have not
filed a reply brief. The motion is now ripe for adjudication.
party's briefing calls into question the well-established
12(b)(6) standard of review, which permits dismissal when a
plaintiff "fail[s] to state a claim upon which relief
can be granted." Fed.R.Civ.P. 12(b)(6). To survive a
12(b)(6) motion, a complaint must include enough facts for a
claim to be "plausible on its face" and thereby
"raise a right to relief above the speculative
level.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555, 570 (2007) . In determining the plausibility of a
claim, district courts are required to assume that all
well-pled factual allegations are true "even if doubtful
in fact, " id. at 555, and must also "draw
all reasonable inferences in favor of the plaintiff, "
Kensington Volunteer Fire Dep't v. Montgomery
County, 684 F.3d 462, 467 (4th Cir. 2012) (citation
omitted). Although the Court must accept all well-pled
factual allegations, a plaintiff's legal conclusions are
not similarly accepted. Ashcroft v. Iqbal, 556 U.S.
662, 678 (2009) (citing Twombly, 550 U.S. at 555).
seek dismissal of the conversion count based on
Virginia's "source of duty rule." The source of
duty rule bars tort claims that implicate a duty owed solely
through contract. Richmond Metro. Auth. v. McDevitt St.
Bovis, Inc., 256 Va. 553, 558, 507 S.E.2d 344, 347
(1998); see Filak v. George, 267 Va. 612, 618, 594
S.E.2d 610, 613 (2004) (" [L]osses suffered as a result
of the breach of a duty assumed only by agreement, rather
than a duty imposed by law, remain the sole province of the
law of contracts."). However, where a tort claim is
based upon an independent, common-law duty, Virginia
law permits a tort claim to survive alongside a claim based
in contract. Richmond Metro., 256 Va. at
558, 507 S.E.2d at 347 (citing Foreign Mission Bd. v.
Wade, 242 Va. 234, 241, 409 S.E.2d 144, 148 (1991)).
Accordingly, pursuant to Virginia law, "a single act or
occurrence can, in certain circumstances, support
causes of action both for breach of contract and for breach
of a duty-arising in tort, thus permitting a plaintiff to
recover both for the loss suffered as a result of the breach
and traditional tort damages, including, where appropriate,
punitive damages." Dunn Const. Co. v. Cloney,
278 Va. 260, 266-67, 682 S.E.2d 943, 946 (2009) (emphasis
conversion claims, the Supreme Court of Virginia has stated
that “[a] cause of action for conversion lies
independent of an action in contract and may provide
a separate basis, distinct from the contract upon which one
[party] may sue another." PGI, Inc. v. Rathe Prods.,
Inc., 265 Va. 334, 344, 576 S.E.2d 438, 443 (2003)
(emphasis added). Notwithstanding such broad legal statement,
Virginia courts have recognized that the Virginia source of
duty rule can act to bar a conversion claim when a party
merely "withholds money that he is supposed to pay on a
contract, " Taveira v. Vieira, No. CL14-5437,
2015 Va. Cir. LEXIS 90, at *17 (Va. Cir. Ct. May 29, 2015)
(City of Virginia Beach), or seizes tangible assets pledged
as collateral as was "within the contemplation of the
parties when entering into the [written] agreement, "
Wachovia Bank, N.A. v. Ranson Tyler Chevrolet,
L.L.C., 73 Va. Cir. 143, 154 (Va. Cir. Ct. 2007) (City
of Roanoke); see also Worldcom, Inc. v. Boyne, 68
F.App'x 447, 453-54 (4th Cir. 2003) (applying Virginia
law, and finding that an employer's actions in blocking
an employee's attempt at exercising vested stock
options implicated a duty that existed "solely by
nature of [the employer's] obligations under the [Stock
Option Agreement], and thus, could not support a conversion
claim). While it thus appears that the source of duty rule
can act to bar a conversion claim in certain circumstances,
the Supreme Court of Virginia has recognized that an alleged
seizure of property occurring after a contract has been
terminated sounds in tort rather than in contract.
See Condo. Servs. v. First Owners' Ass'n of Forty
Six Hundred Condo., Inc., 281 Va. 561, 574, 709 S.E.2d
163, 171 (2011) (holding that because the parties'
contract had terminated before the defendant exercised
dominion over the funds at issue, the "alleged acts did
constitute the "independent, willful tort' of
argued by Plaintiff in opposition to dismissal of the
conversion claim against Daniel Carpenter, Daniel Carpenter
was not a party to the lease at issue in this case.
Because of such fact, and because the Complaint alleges, in
the alternative, that Daniel Carpenter improperly seized
KCE's property for hisown personal
benefit, Compl. ¶¶ 4, 37, the duty
allegedly-violated is not based in contract, but rather, can
only implicate the tort duty not to "wrongfully
exert" dominion over the property of another. PGI,
Inc., 265 Va. at 344, 576 S.E.2d at 443 (citation
omitted); cf. 1-18 Virginia Remedies § 18.03
("The source of duty rule affirms the separateness of
tort and contract and the liability of those in
privity.") (emphasis added). As Defendants have
failed to file a reply brief undercutting Plaintiff's
legal position on this issue, and have not ...