The Virginia Business Litigation Blog
Although parties can sometimes demonstrate both breach of contract and a tortious breach of duty, the duty in such cases must arise separate from the contractual duty, and negligent performance of a contract cannot form the basis for a tort claim. The United States District Court for the Western District of Virginia emphasized this point in American Legion John Radcliff Post 164 v. BB&T Corporation.
Debra Horn was president of the American Legion Ladies Auxiliary Unit 164. Her husband, Mack Horn, was a member of American Legion John Ratcliff Post 164. Over the course of a year, the Horns made several transactions, including writing checks, making expenditures and withdrawals and closing accounts that Post 164 did not authorize. Specifically, Post 164 had a Certificate of Deposit with BB&T Bank. Without the Post’s permission, BB&T allowed Mr. Horn to withdraw $15,447.15 from the CD and Mrs. Horn to withdraw $29,975 and to close the CD by withdrawing $49,975. BB&T processed a deposit of $49,975 to a checking account in Post 164’s name and a check in the amount of $35,000 from Post 164’s checking account into an account that the Horns controlled. The Horns used the funds for their own personal benefit.
Post 164 sued BB&T for breach of contract, negligence, and breach of fiduciary duties. The complaint also contained a claim entitled “Statutory Claim” and asked for punitive damages. BB&T argued that the action was essentially a breach of contract claim and asked that all the other claims be dismissed. BB&T also asked the court to strike Post 164’s claim for punitive 
damages.
In Virginia, allegations of negligent performance of contractual duties are not usually actionable as a tort. Parties can sometimes show both breach of contract and a tortious breach of duty, but the duty must arise separate from the contractual duty. Here, Post 164 alleged that BB&T breached the agreement entered when Post 164 purchased the CD from BB&T. Post 164’s negligence claim is based solely on BB&T’s allegedly negligent performance of its duties under the CD agreement. Such a claim sounds in contract, not tort. Additionally, Post 164 was unable to cite authority supporting its contention that BB&T owed a separate common law fiduciary duty to Post 164. The court therefore dismissed both claims.
The “Statutory Claim” alleged that BB&T’s actions and omissions breached the duties set forth in certain sections of the Virginia Code dealing with bank deposits and collections and fund transfers. However, Post 164 did not identify any statutory language or duty that BB&T may have breached. The court found the allegations too vague to state a claim and dismissed that claim as well.
Finally, because punitive damages are generally not available for breach of contract, and in light of the fact that the court dismissed the negligence, breach of fiduciary duty and statutory claims, the court also dismissed the claim for punitive damages.