Forbes v. Rapp

PRESENT: Hassell, C.J., Keenan, Koontz, Kinser, Lemons, and
Agee, JJ., and Compton, S.J.

BRUCE FORBES

v. Record No. 041722 OPINION BY JUSTICE BARBARA MILANO KEENAN
April 22, 2005
RAYMOND E. RAPP, TRUSTEE, HARRISONBURG
PHYSICIANS FOR ANESTHESIOLOGY, INC., ETC., ET AL.

FROM THE CIRCUIT COURT OF ROCKINGHAM COUNTY
John J. McGrath, Jr., Judge

In this appeal, we consider whether the chancellor erred:

1) in awarding damages to a property owner for breach of a

contract for the sale of land offered at public auction; and 2)

in admitting certain expert testimony.

The following facts are undisputed. In the spring of 2003,

Raymond E. Rapp hired Bland Land Company (BLC) to sell about 143

acres of undeveloped mountain land in Rockingham County (the

property) at a public auction. 1 BLC produced and distributed a

brochure containing photographs, maps, and a description of the

property that stated it was “[t]o be sold by a trustee under

special warranty, with a deeded right of way.” Bruce Forbes, an

adjoining landowner, received a copy of the brochure before the

auction and decided to attend.

BLC held the auction on May 17, 2003. Before the auction,

Gerald C. Bland, owner of BLC, circulated and read aloud a
document entitled “Rapp Auction Sale Announcements.” One of the

announcements stated, “Included with the property is an

appurtenant right of way over and across the existing access

road we all used this morning[.]”

At the end of the auction, Forbes was the high bidder for

the property at $3,600 per acre, for a total bid price of

$514,944. Gregory S. Kellam was the second-highest bidder at

$3,550 per acre. Forbes tendered a ten percent deposit and

signed an acknowledgment agreeing to purchase the property.

Under the auction terms, Forbes agreed to settle on the property

on or before June 17, 2003, and to pay a penalty for any delay.

Forbes later unsuccessfully tried to reach an agreement to

sell the property to Kellam. On June 30, 2003, Forbes, by

counsel, notified Rapp that he was withdrawing his offer to

purchase the property and demanded the return of his deposit.

Forbes stated that his withdrawal was based on

“misrepresentations regarding the existence of a deeded right of

way to the property and . . . the ability to subdivide the

property.” Rapp eventually sold the property to Kellam for

$400,000.

Forbes filed an amended bill of complaint against Rapp,

BLC, and Bland (collectively, the defendants) seeking rescission

1
Harrisonburg Physicians for Anesthesiology, Inc., Profit
Sharing Plan Earmark Investment Trust No. (1) owned the

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of Forbes’ contract to purchase the property and the return of

his deposit. In the alternative, Forbes sought damages for

breach of contract or breach of an “implied understanding” that

his deposit would be returned if the parties failed to reach an

agreement. He also claimed that the defendants wrongfully

converted his deposit. Forbes’ claims were based on allegations

that the property did not have a deeded right of way, and that

the defendants’ representations in the brochure and auction sale

announcements were false and misleading. He sought compensatory

damages equal to his $51,490 deposit and punitive damages of

$250,000.

In response, Rapp filed an answer and a cross-bill for

breach of contract against Forbes. 2 Rapp alleged that Forbes

breached his express written agreement to purchase the property

when he failed to close on the property and informed Rapp that

he did not intend to complete the transaction. Rapp sought

damages of $114,900, the difference between Forbes’ bid price

and the amount received in the sale to Kellam.

The chancellor heard the evidence in a bench trial. The

majority of the evidence addressed the value of the property and

whether Rapp failed to mitigate damages incurred as a result of

Forbes’ alleged contract breach. Forbes presented the testimony

property. Rapp sold the property in his capacity as trustee.

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of his son, Jeffrey C. Forbes (Jeffrey), who stated that the

property contained timber worth at least $150,000, and that the

property was worth between $1,000 and $1,500 per acre, excluding

the timber value.

Forbes testified that he was surprised that the bidding for

the property exceeded $2,000 per acre, but that the property was

worth $3,600 per acre to him as protection for his adjoining

land. Forbes agreed with Jeffrey’s valuation of the timber on

the property. Forbes also presented testimony from Dean M.

Nichols, one of his attorneys, and Kevin Williams, his agent,

who both stated that Kellam had been willing to pay Forbes

$450,000 for the property.

Rapp presented testimony from various witnesses. Kellam

testified he originally hoped to purchase the property for

$300,000, and that he intended to make no higher bid than

$380,000, but that he nevertheless made a final bid of $3,550

per acre, or about $505,000. Kellam stated that he negotiated

with Forbes to purchase the property after the auction and that,

although he indicated an interest in paying about $450,000 for

the property, he never made a written offer. Kellam also stated

that Bland approached him about purchasing the property after

2
BLC and Bland filed an answer, special plea in bar, and
interpleader action. They are not parties to this appeal.

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Forbes refused to complete the sale, and that Kellam ultimately

purchased the property for $400,000.

Rapp also presented the expert testimony of Michael W.

Pugh, a certified real estate appraiser. Pugh testified that he

appraised the property and determined that it had a fair market

value of $415,000. He stated that this figure represented an

accepted range for fair market value of plus or minus ten

percent, as is customary in the field of real estate appraisal.

Pugh acknowledged that he did not assign value to any timber on

the property.

Regarding Rapp’s efforts to mitigate damages, Bland

testified that the only effort he made on Rapp’s behalf after

Forbes refused to complete the sale was to contact Kellam about

purchasing the property. Bland also stated that he was

“astounded” at the high price Forbes had bid for the property,

and that he advised Rapp to sell the property to Kellam for

$400,000 because Bland thought that this price was still “high

as a kite.”

Rapp presented the expert testimony of George R. Heatwole,

a licensed auctioneer and real estate broker, who had auctioned

about 100 properties per year over the past 25 or more years.

Over Forbes’ objection, the chancellor asked Heatwole to relate

his experience re-auctioning real estate that had not settled

after a first auction. Heatwole replied that in such instances,

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his experience has been that the real estate sold at a lower

price at a second auction.

The following exchange then occurred between Heatwole and

Rapp’s counsel:

Q: Can you quantify whether it’s significantly less
or close to the same price, but less?

A: Well, it happens so infrequently and, you know,
my experience has been, gosh, a, a figure off the
top of my head would be 10 to 20 percent less at
least, but it happens so infrequently that I, I
don’t have a basis.

Forbes objected to this testimony, arguing that it was

speculative. The chancellor overruled the objection. Heatwole

further testified that auctioneers in Virginia generally agree

that it is not a good practice to re-auction property that has

failed to close, and that he would recommend against doing so.

David A. Penrod, one of Rapp’s attorneys, also testified that he

advised Rapp that putting the property up for auction a second

time would be “a bad idea.”

At the conclusion of the evidence, the chancellor held that

Forbes wrongfully breached his contract to purchase the property

from Rapp. The chancellor found that Forbes’ testimony was

“totally lacking in credibility,” and that Forbes’ conduct after

the auction “was a continual pattern of acting in bad faith.”

The chancellor concluded that the fair market value of the

property was $415,000, and awarded Rapp judgment on the cross-

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bill in the amount of $99,944.00, the difference between Forbes’

final bid and the fair market value, plus interest. The

chancellor entered a final judgment order reflecting this award

and dismissing all Forbes’ claims against the defendants.

Forbes appeals.

Forbes argues that the chancellor erred in awarding

judgment to Rapp because Rapp failed to mitigate his damages.

According to Forbes, Rapp should have re-auctioned the property,

advertised the property for sale to the general public, placed

the property with a “multiple listing service,” or contacted

other bidders in addition to Kellam. Forbes asserts that the

record shows that Rapp did not obtain a reasonable price for the

property, because Kellam previously had offered a much higher

price to both Forbes and Rapp. Forbes also argues that the

chancellor erred in admitting Heatwole’s testimony because it

was speculative and Heatwole was unfamiliar with the facts

surrounding the auction at which Forbes purchased the property.

In considering the merits of these arguments, we apply an

established standard of review. The chancellor, who heard the

evidence ore tenus, evaluated the witnesses’ testimony and their

credibility. See Shooting Point, L.L.C. v. Wescoat, 265 Va.

256, 264, 576 S.E.2d 497, 501 (2003); Tauber v. Commonwealth,

263 Va. 520, 526, 562 S.E.2d 118, 120 (2002). Thus, his

judgment is entitled to the same weight as a jury verdict. The

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Dunbar Group, LLC v. Tignor, 267 Va. 361, 366-67, 593 S.E.2d

216, 219 (2004); Chesterfield Meadows Shopping Ctr. Assocs.,

L.P. v. Smith, 264 Va. 350, 355, 568 S.E.2d 676, 679 (2002). We

will not set aside the chancellor’s judgment on appeal unless it

is plainly wrong or without evidence to support it.

Code § 8.01-680; Tignor, 267 Va. at 367, 593 S.E.2d at 219;

Shooting Point, 265 Va. at 264, 576 S.E.2d at 501.

We first consider Forbes’ argument that Rapp failed to

mitigate his damages. We have long recognized the obligation of

an injured party to mitigate damages. Thus, when a purchaser

has breached a contract for the sale of real estate, the seller

nonetheless has the duty of making reasonable efforts to

mitigate damages resulting from the breach, and to the extent

that the seller fails to do so, he may not recover the

additional damages incurred. Lawrence v. Wirth, 226 Va. 408,

412, 309 S.E.2d 315, 317 (1983); Haywood v. Massie, 188 Va. 176,

182, 49 S.E.2d 281, 284 (1948); Restatement (Second) of

Contracts § 350, cmt. b. (1981); Charles T. McCormick, Handbook

on the Law of Damages § 33 (1935); see Jennings v. Realty

Developers, Inc., 210 Va. 476, 483, 171 S.E.2d 829, 834-35

(1970).

An assertion that an injured party has failed to mitigate

damages is an affirmative defense. See R.K. Chevrolet, Inc. v.

Bank of the Commonwealth, 256 Va. 74, 77, 501 S.E.2d 769, 771

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(1998); Stohlman v. S&B Ltd. P’ship, 249 Va. 251, 256, 454

S.E.2d 923, 926 (1995); Marefield Meadows, Inc. v. Lorenz, 245

Va. 255, 266, 427 S.E.2d 363, 369 (1993). In the present case,

Forbes, as the party asserting this defense, bore the burden of

proof on that issue. See R.K. Chevrolet, 256 Va. at 77, 501

S.E.2d at 771; Stohlman, 249 Va. at 256, 454 S.E.2d at 926;

Marefield Meadows, 245 Va. at 266, 427 S.E.2d at 369.

We conclude that Forbes did not satisfy his evidentiary

burden. First, he failed to present any evidence that marketing

the property in the manner he advocated would have resulted in a

higher purchase price for the property. Second, the chancellor

was not required to accept Forbes’ testimony that Kellam had

offered $450,000 for the property as evidence of the property’s

value, because Kellam testified that he had not made a written

offer at that price and ultimately had concluded that “it wasn’t

a deal that I was interested in.”

In the absence of further evidence from Forbes, the

chancellor found that the fair market value of the property was

$415,000, which was supported by Pugh’s expert testimony. This

amount surpassed the valuation placed on the property by Forbes’

son, Jeffrey, whose highest estimate of the combined timber

value and land value of the property was $364,500. Moreover,

Forbes had testified that the property was worth between

$250,000 and $300,000. Therefore, Forbes’ own evidence showed

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that Rapp sold the property for more than its fair market value.

Based on this record, we hold that the chancellor did not err in

rejecting Forbes’ claim that Rapp failed to mitigate his

damages.

We next consider Forbes’ argument that the chancellor erred

in admitting Heatwole’s testimony. Before expert testimony may

be admitted in a civil case to assist the fact finder, that

testimony must meet certain requirements, including the

requirement of an adequate factual foundation. Countryside

Corp. v. Taylor, 263 Va. 549, 553, 561 S.E.2d 680, 682 (2002);

John v. Im, 263 Va. 315, 319-20, 559 S.E.2d 694, 696 (2002); see

Code §§ 8.01-401.1 and –401.3. Generally, the decision whether

to admit expert testimony is a matter committed to the

chancellor’s sound discretion, and we will reject the

chancellor’s determination in this regard only when the record

shows an abuse of that discretion. John, 263 Va. at 320, 559

S.E.2d at 696; Virginia Elec. & Power Co. v. Dungee, 258 Va.

235, 258, 520 S.E.2d 164, 177 (1999).

Expert testimony is inadmissible if it is speculative or

based on assumptions that have an insufficient factual basis.

Countryside Corp., 263 Va. at 553, 561 S.E.2d at 682; John, 263

Va. at 320, 559 S.E.2d at 696; Keesee v. Donigan, 259 Va. 157,

161, 524 S.E.2d 645, 648 (2000); Tarmac Mid-Atlantic, Inc. v.

Smiley Block Co., 250 Va. 161, 166, 458 S.E.2d 462, 466 (1995).

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Expert testimony is also inadmissible when an expert has not

considered all variables bearing on the inferences to be drawn

from the facts presented. Countryside Corp., 263 Va. at 553,

561 S.E.2d at 682; John, 263 Va. at 320, 559 S.E.2d at 696; ITT

Hartford Group, Inc. v. Virginia Fin. Assocs., Inc., 258 Va.

193, 201, 520 S.E.2d 355, 359 (1999).

We agree with Forbes that certain portions of Heatwole’s

testimony were inadmissible because they were speculative and

lacked an adequate factual foundation. Heatwole improperly was

allowed to testify that real estate auctioned a second time sold

at a lower price, without being required to consider whether the

facts presented here would have led to a different conclusion

concerning the expected price at a re-auction. Also, in

attempting to fix a percentage at which a purchase price

generally might be expected to decrease upon a re-auction,

Heatwole effectively conceded that he lacked a factual basis for

rendering such an opinion but nevertheless stated a figure “off

the top of [his] head.”

We disagree, however, with Forbes’ contention that the

improper admission of these portions of Heatwole’s testimony

requires reversal of the chancellor’s judgment. Under the

doctrine of harmless error, we will affirm the circuit court’s

judgment when we can conclude that the error at issue could not

have affected the court’s result. Blue Stone Land Co., Inc. v.

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Neff, 259 Va. 273, 279, 526 S.E.2d 517, 519 (2000); Rhoades v.

Painter, 234 Va. 20, 24, 360 S.E.2d 174, 176 (1987); see Holmes

v. LG Marion Corp., 258 Va. 473, 483, 521 S.E.2d 528, 535

(1999).

Heatwole’s testimony was relevant to show that Rapp did not

fail to mitigate his damages by declining to re-auction the

property. However, because Forbes did not present evidence that

Rapp would likely have obtained a higher price if he had re-

auctioned the property, Heatwole’s testimony merely served as an

unnecessary rebuttal to a defense that was not proved. Thus, we

hold that the chancellor’s error in admitting this evidence was

harmless because it could not have affected the result that he

reached in this case.

For these reasons, we will affirm the chancellor’s

judgment.

Affirmed.

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