PRESENT: All the Justices
BENTLEY FUNDING GROUP, L.L.C., ET AL.
OPINION BY
v. Record No. 041386 JUSTICE G. STEVEN AGEE
March 3, 2005
SK&R GROUP, L.L.C.
FROM THE CIRCUIT COURT OF PRINCE WILLIAM COUNTY
Richard B. Potter, Judge
Bentley Funding Group, L.L.C. (“Bentley”) and Peter Denger
appeal from a judgment of the Circuit Court of Prince William
County in favor of SK&R Group, L.L.C. (“SK&R”). The judgment
awarded SK&R the balance of certain erosion control escrow
accounts (“the Escrows”) posted with Prince William County,
Virginia (“the County”) on behalf of Bentley. For the reasons
set forth below, we will reverse the judgment of the trial
court.
I. BACKGROUND AND PRIOR PROCEEDINGS
Bentley acquired approximately 164 acres located in the
County, which it undertook to develop as River Oaks. In March
1998, as a part of its efforts to develop River Oaks, Bentley
entered into five Siltation and Erosion Control Agreements with
the County (“the Agreements”). As required by the Agreements,
Bentley caused cash Escrows to be posted with the County on
March 16, 1998, in order to secure the performance of Bentley’s
obligations under the Agreements. Over the course of time, the
County withdrew some amounts from the Escrows to perform erosion
1
control work at River Oaks, leaving a balance of $349,334.82 in
January 2001.
Denger, who owns a one-third membership interest in
Bentley, provided the entire escrow amount from his personal
funds to a trust account of Bentley’s attorneys who transferred
the funds to the County. Bentley and Denger had an unwritten
agreement that the Escrows would be returned to Denger when
released by the County.
On August 11, 2000, an involuntary Chapter 11 bankruptcy
petition was filed in the United States Bankruptcy Court for the
Eastern District of Virginia against Bentley. An order for
relief was entered, but no trustee was appointed so the
bankruptcy proceeded with Bentley as debtor in possession. As
required by bankruptcy law, Bentley and its members filed
various disclosures and schedules under penalty of perjury. The
Escrows were not listed on any schedule as an asset of Bentley’s
bankruptcy estate. SK&R was a secured creditor of Bentley with
a recorded deed of trust secured by the River Oaks real
property.
On January 9, 2001, while Bentley’s bankruptcy proceeding
was pending, Bentley and SK&R entered into a contract whereby
Bentley would transfer all of the River Oaks real property to
SK&R (“the Contract”) except for a 23 acre parcel zoned for
2
commercial use. The Contract, which required the approval of
the Bankruptcy Court, states in relevant part:
RECITALS
Seller is owner of that certain real property . . .
consisting of approximately 164 acres of land . . .
and all improvements thereon and appurtenances
thereunto belonging, . . . (the “Prince William
Property”). The Prince William Property, . . .
consists of Parts 1 through 6. . . . Seller has agreed
to sell to Purchaser all its right, title and interest
in and to Parts 1, 3, 4, 5 and 6 of the Prince William
Property . . . .
CONTRACT
1. Property. . . . Seller hereby agrees to sell and
Purchaser agrees to purchase Parts 1, 3, 4, 5 and 6 of
the Prince William Property . . . together with all
improvements thereon and appurtenances thereunto
belonging and together with all approvals, permits,
development rights, all consents and renewals thereof
relating thereto (the “Property”) in accordance with
the provisions and on the terms and conditions
hereinafter set forth.
. . . .
5. Settlement. (a) Possession of the Property shall be
given to Purchaser by Seller at settlement. . . .
Purchaser and Seller agree to execute such other
documents at settlement as may be reasonably necessary
or advisable to consummate the transaction
contemplated hereby. At settlement, Seller shall also
convey and assign to Purchaser all of Seller’s
interest in and to any and all warranties relating to
the Property.
There is no mention of the Agreements or the Escrows in the
Contract. Denger, in his individual capacity, was not a party to
the Contract.
3
On January 30, 2001, the Bankruptcy Court entered an Order
approving the Contract, which contained the following finding by
the Court:
E. The terms of the Contract provide that [Bentley]
will convey to SK&R or its designee approximately 141
acres of the River Oaks Property (such 141 acres, the
“Property”), free and clear of all liens, interests,
and encumbrances, it being the intent of the parties
that SK&R receive title to all of [Bentley’s] interest
in the River Oaks Property except the nearly 23 acres
that is zoned “B-1” for commercial use, all as more
particularly described in the Contract;
At closing on February 9, 2001, Bentley delivered and SK&R
accepted a General Warranty Deed (“the Deed”) conveying to SK&R
140.7543 acres of River Oaks Property, “together with all
improvements thereon and appurtenant rights thereunto
belonging.” The Deed contains no mention or reference to the
Escrows. No assignment or other instrument was ever executed
whereby Bentley or Denger assigned, transferred or otherwise
conveyed the Escrows to SK&R. No assignment or similar
instrument transferring the Escrows was requested by SK&R at
settlement, or at any time thereafter.
On March 26, 2002, the County issued a check to Bentley in
the amount of $21,164.57, refunding a portion of the Escrows.
On April 4, 2002, SK&R notified the County that it claimed the
Escrows. The County then filed an interpleader action to
4
determine ownership of the Escrows naming Bentley and SK&R as
defendants. 1
SK&R claimed ownership of the Escrows under the Contract as
part of “all improvements thereon and appurtenances thereunto
belonging and together with all approvals, permits, development
rights, consents and renewals thereof relating thereto.” SK&R
also claimed the Escrows under the language of the Bankruptcy
Court Order confirming the Contract which recited: “it [was] the
intent of the parties that SK&R receive title to all [Bentley’s]
interest in the River Oaks Property.”
Bentley and Denger denied SK&R had any interest in the
Escrows. Bentley contended that the Escrows had been posted for
the benefit of Bentley with funds belonging to Denger and that
the Escrows should be paid to Denger or alternatively, released
to Bentley. Similarly, Denger contended that he provided the
funds for the Escrows, and they should be paid to him or
alternatively, to Bentley.
While the interpleader action was pending in the trial
court, SK&R filed a motion in the Bankruptcy Court to reopen
Bentley’s bankruptcy proceeding which had been closed after
payment in full to all creditors. SK&R asked the Bankruptcy
Court to clarify its Order confirming the Contract as to whether
1
The trial court later entered an agreed Order granting
Bentley leave to file an amended answer and joining Denger as a
party defendant.
5
the Escrows were conveyed by the Contract. The Bankruptcy Court
denied the motion.
Upon conclusion of a bench trial, the trial court ruled
that SK&R owned the Escrows in its order of March 12, 2004
(“March 12th order”), which also incorporated the transcript of
the bench ruling. 2 The trial court found, “it was the intent of
the parties to transfer the entire project from Bentley Funding
Group, L.L.C., to SK&R Group, L.L.C., including the erosion
control escrows and agreements,” and that the Escrows
constituted a “development right” under the Contract.
Accordingly, as all development rights were conveyed to SK&R
under the Contract, SK&R owned the Escrows. Further, the trial
court found that because Bentley never claimed the Escrows as an
asset in the bankruptcy proceeding, Bentley could not now assert
a claim. “The [Escrows] were not listed by [Bentley] as an
asset in the bankruptcy proceedings and therefore, [Bentley]
cannot now claim it as an asset.”
The trial court also found “there is no evidence to support
the allegation that Mr. Denger owned the escrows.” The trial
court opined that in as much as the Escrows were part of the
development rights conveyed to SK&R, and that the conveyance as
2
The trial court previously entered a decree acknowledging
that the County had deposited with the clerk of the trial court
the sum of $328,170.25, representing the entire balance of the
Escrows and dismissing the County as a party.
6
approved must be free and clear of all liens . . . and it was
specifically not the intention of the parties in entering into
the Contract that any party, including Mr. Denger, was to have
an interest in any portion of the assets which were to be
conveyed in the Contract.
We awarded Bentley and Denger this appeal.
II. STANDARD OF REVIEW
Bentley and Denger assign error to the trial court’s ruling
in the nature of claim preclusion by judicial estoppel. While
this Court has not had occasion to set out a standard of review
for the application of judicial estoppel, the United States
Court of Appeals for the Fourth Circuit, along with the majority
of jurisdictions, 3 reviews a trial court’s application of
judicial estoppel for an abuse of discretion. Jaffee v.
Accredited Surety and Cas. Co., Inc., 294 F.3d 584, 595, n.7
(4th Cir. 2002). Because judicial estoppel is an equitable
doctrine, “invoked in the discretion of the [trial] court,” King
3
See Alternative Sys. Concepts, Inc. v. Synopsys, Inc., 374
F.3d 23, 30-31 (1st Cir. 2004); Cheng v. K&S Diversified Invs.,
Inc. (In re Cheng), 308 B.R. 448, 452 (B.A.P. 9th Cir. 2004);
Hall v. GE Plastic Pacific PTE Ltd., 327 F.3d 391, 396 (5th Cir.
2003); De Leon v. Comcar Indus., 321 F.3d 1289, 1291 (11th Cir.
2003); Klein v. Stahl GMBH & Co., 185 F.3d 98, 108 (3d Cir.
1999); Okland Oil Co. v. Conoco Inc., 144 F.3d 1308, 1325 (10th
Cir. 1998); Sword v. Sweet, 92 P.3d 492, 502 (Idaho 2004);
Barack Ferrazzano Kirschbaum Perlman & Nagelberg v. Loffredi,
795 N.E.2d 779, 784 (Ill. App. Ct. 2003); L.D.H. v. K.A.H., 665
N.E.2d 43, 46-47 (Ind. Ct. App. 1996); Whitacre P'ship v.
Biosignia, Inc., 591 S.E.2d 870, 894 (N.C. 2004).
7
v. Herbert J. Thomas Mem. Hosp., 159 F.3d 192, 196 (4th Cir.
1998), we will also apply an abuse of discretion standard.
The parties agree that the Contract is not ambiguous, and
the trial court so found: "I don't find this as [sic]
ambiguous."
When the terms of the parties’ documents are clear and
unambiguous the interpretation of those terms presents
a question of law. . . . Thus, on appeal, we are not
bound by the trial court’s resolution of these
questions of law, and we are afforded the same
opportunity as the trial court to consider the terms
of the documents at issue.
Musselman, L.L.C. v. The Glass Works, 260 Va. 342, 346, 533
S.E.2d 919, 921 (2000) (citations omitted). Therefore, we will
review and interpret the provisions of the Contract without any
deference to the trial court’s conclusions.
III. ANALYSIS
Bentley and Denger make seven assignments of error to the
trial court’s judgment which may be consolidated to the
following more concise issues: 4
(1) The trial court erred in finding that Bentley’s failure to
list the Escrows as an asset of its bankruptcy estate
precludes assertion of a claim of ownership in the instant
proceeding.
(2) The trial court erred in not construing the Contract in
conformity with its plain meaning or in accordance with the
rule of expressio unius est exclusio alterius.
4
On brief to this Court, Bentley and Denger list an eighth
assignment of error, which they concede was not granted by this
Court and will therefore not be considered. See Rule 5:17(c).
8
(3) The trial erred in finding that the Escrows were a
“development right.”
(4) The trial court erred in finding that the post-contractual
conduct of Bentley, specifically Bentley’s failure to list
the Escrows as assets in bankruptcy, was dispositive of the
parties’ intent under the Contract.
(5) The trial court erred in finding there was no evidence
Denger owned the Escrows.
The trial court’s March 12th order awarding the Escrows to
SK&R is based, in part, upon two specific findings:
It would be a sham on the Bankruptcy Court for this
Court to find that the erosion control escrows were an
asset of Bentley Funding Group, L.L.C.[Finding No. 6];
and
. . . .
The erosion control escrows were not listed by Bentley
Funding Group, L.L.C., as an asset in the bankruptcy
proceedings and therefore Bentley Funding Group,
L.L.C., cannot now claim it as an asset. [Finding No.
8]
Although not termed as such, the trial court effectively
ruled that Bentley is barred from making a claim to the Escrows
under the doctrine of judicial estoppel. We will therefore
first examine the trial court’s judgment on this issue because
it is dispositive as to Bentley if the trial court is correct.
There is, however, no judgment by the trial court applying
9
judicial estoppel as to Denger so his claim to the Escrows is
unaffected by the resolution of this issue. 5
A. Claim Preclusion by Judicial Estoppel
“[J]udicial estoppel forbids parties from assuming
successive positions in the course of a suit, or series of
suits, in reference to the same fact or state of facts, which
are inconsistent with each other, or mutually contradictory.”
Lofton Ridge, LLC v. Norfolk S. Ry. Co., 268 Va. 377, 380-81,
601 S.E.2d 648, 650 (2004) (citations and internal quotation
marks omitted). While the concept of judicial estoppel seems
clear enough, application of the doctrine has not proven
susceptible to precise definition. “The circumstances under
which judicial estoppel may appropriately be invoked are
probably not reducible to any general formulation of principle.”
Allen v. Zurich Ins. Co., 667 F.2d 1162, 1166 (4th Cir. 1982).
In New Hampshire v. Maine, 532 U.S. 742 (2001), the United
States Supreme Court recognized the inherent malleability of the
doctrine of judicial estoppel. “[W]e do not establish
5
SK&R offered evidence in the trial court that Denger
answered interrogatories in a New Jersey proceeding wherein he
failed to list the Escrows as a personal asset. However, SK&R
was not a party to the New Jersey proceeding. As more
thoroughly discussed below, in Lofton Ridge, LLC, v. Norfolk S.
Ry. Co., 268 Va. 377, 383, 601 S.E. 2d 648, 651 (2004), we noted
“the doctrine of judicial estoppel will not act as a preclusive
bar to the subsequent proceeding unless the parties are the
same.” Furthermore, the trial court in the case at bar never
addressed judicial estoppel as to Denger and SK&R did not assign
cross error in that regard.
10
inflexible prerequisites or an exhaustive formula for
determining the applicability of judicial estoppel.” Id. at
751. Although we have not previously set out a specific listing
of all the necessary elements of judicial estoppel, certain
factors must be present in order for the doctrine to apply.
The fundamental element of judicial estoppel is that “the
party sought to be estopped must be seeking to adopt a position
that is inconsistent with a stance taken in a prior litigation.
And the position sought to be estopped must be one of fact
rather than law or legal theory.” Lowery v. Stovall, 92 F.3d
219, 224 (4th Cir. 1996) (citation omitted). Accord Lofton
Ridge, 268 Va. at 382, 601 S.E.2d at 651.
To the extent Bentley lays claim to the Escrows in the case
at bar, its position is one of fact and is clearly inconsistent
with its failure to claim the Escrows in the prior bankruptcy
proceeding. The initial element of judicial estoppel is thus
satisfied because the party sought to be estopped (Bentley) has
adopted a position in the current litigation (that it owns the
Escrows) that is inconsistent with a stance (failure to claim
the Escrows as an asset) taken in prior litigation (Bentley’s
bankruptcy proceeding).
Although not a universally required element of judicial
estoppel, it is clear the doctrine applies in Virginia only when
11
the parties to the disparate proceedings are the same. 6 Compare
Lofton Ridge, 268 Va. at 382, 601 S.E.2d at 651, with Lowery, 92
F.3d at 223, n.3, and Ex Parte First Ala. Bank, 883 So.2d 1236,
1243-45 (Ala. 2003). We recently reiterated this requirement in
Lofton Ridge, noting our previous holding in The Pittston Co. v.
O’Hara, 191 Va. 886, 902, 64 S.E. 34, 43 (1951). “[T]he
doctrine of estoppel by inconsistent position [i.e., judicial
estoppel] does not apply to a prior proceeding in which the
parties are not the same.” Lofton Ridge, 268 Va. at 382, 601
S.E.2d at 651.
Bentley and SK&R are without question parties in interest
in the case at bar because each claims the Escrows. Bentley and
SK&R were the parties before the Bankruptcy Court petitioning
for approval of the Contract. Plainly, the required element of
the same parties is met in this case.
A prior inconsistent position and the same parties are not,
however, solely sufficient to support the application of
6
An exception to this requirement may exist where the
liability of one defendant is derivative of the liability of
another; for example, “where the relation between the defendants
in the two suits has been that of principal and agent, master
and servant, or indemnitor and indemnitee.” Lofton Ridge, 268
Va. at 382-83, 601 S.E.2d at 651. (citation omitted).
12
judicial estoppel. As the Supreme Court noted in New Hampshire,
at least one other element must be present. 7
Courts regularly inquire whether the party has
succeeded in persuading a court to accept that party’s
earlier position, so that judicial acceptance of an
inconsistent position in a later proceeding would
create the perception that either the first or the
second court was misled. Absent success in a prior
proceeding, a party’s later inconsistent position
introduces no risk of inconsistent court
determinations, and thus poses little threat to
judicial integrity.
532 U.S. at 750-51 (internal quotation marks and citations
omitted).
The importance of this factor as a condition precedent to
the application of judicial estoppel was highlighted by the
United States Court of Appeals for the Fourth Circuit in Lowery.
The insistence upon a court having accepted the
party’s prior inconsistent position ensures that
judicial estoppel is applied in the narrowest of
circumstances. Indeed, the prior success rule narrows
the scope of judicial estoppel to the point at which
the necessity of protecting judicial integrity
outweighs the ramifications of that protection upon
the litigant and the judicial system. Because of the
harsh results attendant with precluding a party from
asserting a position that would normally be available
to the party, judicial estoppel must be applied with
caution.
7
In New Hampshire v. Maine, 532 U.S. 742, 751 (2001), the
Supreme Court also cited another element of judicial estoppel:
“whether the party seeking to assert an inconsistent position
would derive an unfair advantage or impose an unfair detriment
on the opposing party if not estopped.” An analysis of this
element is not necessary to resolution of this case, and we
express no opinion on the necessity of this factor in the
application of judicial estoppel in Virginia.
13
Lowery, 92 F.3d at 225 (citations and internal quotation marks
omitted). Without the requirement that the prior court accepted
the earlier inconsistent position, facts not material or
relevant in the prior proceeding could be asserted as a bar to a
party’s cause of action in a later proceeding.
In the case at bar it is clear that the prior court, the
Bankruptcy Court, placed no reliance on the absence of the
Escrows as an asset of Bentley’s bankruptcy estate. The
Bankruptcy Court’s memorandum opinion and order of June 9, 2003,
denying SK&R’s motion to reopen Bentley’s bankruptcy proceeding,
noted that in approving the Contract the Court’s “only role was
to ensure that the terms of the sale did not prejudice or impair
the rights of other creditors or the equity security holders.”
The Bankruptcy Court then observed that “no issues are raised
which implicate specific rights protected by the Bankruptcy
Code.” This was true, in part, because Bentley’s Chapter 11
plan paid all creditors in full including the unsecured
creditors. The Bankruptcy Court explained that it agreed with
Bentley that
. . . there could be no meaningful “administration” of
the escrowed funds because all claims have been paid
or otherwise satisfied. Assets are administered in
bankruptcy in order to pay creditors. After the
creditors have received all to which they are
entitled, any remaining assets simply revert back to
the debtor.
14
Even though SK&R’s secured claim against the Property was
satisfied when SK&R acquired the Property, the Bankruptcy Court
noted that SK&R, and consequently the Court, could not have
relied on a transfer of the Escrows as a basis for approving the
Contract:
SK&R was not a third-party purchaser but was a
creditor that was agreeing to release its claim
against the debtor in exchange for the property.
SK&R’s counsel conceded at oral argument that SK&R was
unaware of the existence of the cash escrow at the
time it entered into the contract with the debtor and
voted in favor of the debtor’s plan. SK&R can hardly
argue, therefore, that it expressly relied on
receiving the escrow in exchange for waiving its
claim.
It is clear that Bentley’s prior inconsistent position
regarding the Escrows was not accepted or relied upon by the
Bankruptcy Court. Because this critical element of judicial
estoppel is absent, the doctrine cannot be applied to Bentley in
the case at bar. The trial court therefore erred in ruling that
Bentley was estopped from asserting a claim to the Escrows
because it took an inconsistent position in the Bankruptcy Court
by failing to list the Escrows as an asset of its bankruptcy
estate. 8
8
Had the facts in Bentley’s bankruptcy proceeding been
different, the judicial estoppel element that a prior
inconsistent position must have been accepted by the prior court
may have been met. In a Chapter 7 proceeding with less than
full payout to all creditors, or in a Chapter 11 proceeding
involving a cram down or reorganization plan resulting in less
than a full payout to all creditors, the failure to list the
15
B. The Plain Meaning of the Contract
Having determined the doctrine of judicial estoppel does not
apply under the facts of this case, we next address Bentley and
Denger’s argument that the trial court failed to follow the
plain meaning of the Contract in several respects.
Specifically, Bentley and Denger aver the trial court erred in
holding the Escrows were a development right and thus passed to
SK&R under that term of the Contract. Further, Bentley and
Denger contend the trial court ignored the plain meaning of
“Property” in the Contract and improperly construed the Contract
to include the Escrows as part of the “project.” We agree with
Bentley and Denger.
The parties do not dispute that the Contract is
unambiguous, and the trial court agreed. “[W]hen contract terms
are clear and unambiguous, we must construe those terms
according to their plain meaning.” Lansdowne Dev. Co., L.L.C.
v. Xerox Realty Corp., 257 Va. 392, 400, 514 S.E.2d 157, 161
(1999). A court may not "add to the terms of the contracts of
parties by construction, in order to meet the [circumstances] of
a particular case." C. S. Luck & Sons, Inc. v. Boatwright, 157
Va. 490, 497, 162 S.E. 53, 55 (1932). We therefore examine the
terms of the Contract as written.
Escrows could have been a fundamental factor affecting the
Bankruptcy Court’s decisions. See, e.g., Barger v. City of
Cartersville, 348 F.3d 1289, 1294-95 (11th Cir. 2003).
16
The Contract specifically defined the term “Property” to be
the delineated real property “together with all approvals,
permits, development rights, consents and renewals thereof
relating thereto.” Nowhere in the Contract do the terms
“project” or “Escrows” appear. Neither does the Contract
contain an inference that something other than the “Property” is
conveyed.
The trial court noted the sale of the Property took place
during Bentley’s bankruptcy proceeding and that the Contract,
therefore, was “not just the sale of the real estate . . . but
the salvage of the entire project.” The trial court found in
the March 12th order that “it was the intent of the parties to
transfer the entire project . . . including the erosion control
escrows.”
The trial court implied that the Bankruptcy Court’s Order
approving the Contract included the entire River Oaks project,
not just the Property in the confirmed conveyance. However, the
term “project” does not appear in the Bankruptcy Court Order.
To the contrary, that Order specifically recites that SK&R is to
receive Bentley’s interest in the “Property” under the “terms of
the Contract” and approves the Contract.
It is the function of the court to construe the
contract made by the parties, not . . . to alter the
contract they have made so as to conform it to the
court's notion of the contract they should have made
in view of the subject matter and the surrounding
17
facts and circumstances. . . . The court . . . is not
at liberty . . . to put a construction on the words
the parties have used which they do not properly bear.
It is the court's duty to declare what the instrument
itself says it says.
Ames v. American Nat. Bank, 163 Va. 1, 38, 176 S.E. 204, 216
(1934).
The trial court’s construction of the admittedly
unambiguous Contract, transforming the mutually defined term of
the conveyance, “Property,” into the transfer of an unmentioned
and undefined term, “Project,” is plainly wrong. The trial
court ignored the plain language of the Contract by adding
provisions not included by the parties. This it cannot do. The
trial court cannot conjure the conveyance of the Escrows under
the rubric of “the project” when the parties have not chosen by
the plain language of the Contract to do so.
Further, under the principle of expressio unius est
exclusio alterius, the omission of a particular covenant or term
from a contract reduced to writing shows an intent to exclude
it. First Nat'l Bank v. Roy N. Ford Co., 219 Va. 942, 946, 252
S.E.2d 354, 357 (1979). As Property under the Contract does not
include the Escrows, the trial court cannot add that asset to
the items conveyed. Thus, unless the term “development rights,”
which is used in the Contract, includes the Escrows by
definition, we must find that the Contract did not transfer the
Escrows.
18
In examining the Contract’s conveyance of “all approvals,
permits, development rights, consents and renewals” as part of
the Property, the trial court found that “an erosion control
escrow constitutes a development right” because “this is an
interest claim that the developer has, in this case SK&R, [in]
the development, the improvement of this particular property.
So I don’t think it’s a stretch to say that an erosion control
escrow is a development right.” 9
Development rights are property rights. "Although less
than a fee interest, development rights are beyond question a
valuable right in property." Mission Springs, Inc. v. City of
Spokane, 954 P.2d 250, 257 (Wash. 1998). While a deed or
contract conveying a development right will often identify the
scope of that right, that did not occur in this case. However,
it is clear the Escrows are not an interest in real property or
a related right to real property.
Rather, an escrow is “[a]n account held in trust or as
security.” Black’s Law Dictionary 584 (8th ed. 2004). Whatever
else a development right may encompass, it does not include a
security interest like the Escrows unless the parties have so
agreed. To hold otherwise would fundamentally alter the meaning
of development rights and, again, add terms to the Contract not
9
The trial court determined the Escrows were not an
approval, consent or permit and no error was assigned to that
finding.
19
agreed upon by the parties. Had the parties wished, in addition
to development rights, to convey any asset securing those
rights, they could have done so. They did not. The trial court
therefore erred in determining that the Contract conveyed the
Escrows as a “development right.”
As a consequence, the trial court’s finding that no
evidence supported Denger’s claim to the Escrows is also
untenable. The trial court based its judgment as to Denger on
the theory that the Escrows passed to SK&R as “development
rights” which the Contract required “be free and clear of all
liens, interest and encumbrances.” As Denger had not joined the
Contract to note an exception to the lien-free conveyance of the
Escrows, the trial court reasoned any claim by him violated that
contractual covenant.
Having determined that the development rights do not
include the Escrows, the trial court’s basis for its decision as
to Denger’s claim to the Escrows is without foundation.
Moreover, the record plainly reflects Denger’s transfer of all
the funds comprising the Escrows directly from his personal
account to legal counsel’s trust account and in turn, to the
County.
C. Post-Contractual Conduct
In ruling from the bench that Bentley intended the Contract
to convey the Escrows as part of the Project, as opposed to the
20
Property, the trial court hinged its analysis of the Contract on
the parties’ post-contractual conduct. That conduct consisted
of one unilateral event, Bentley’s failure to list the Escrows
in its bankruptcy proceeding.
I think [the finding that the escrow agreements are
part of the project is] most strongly borne out by the
conduct of the parties after they’ve entered into the
contract. . . . [T]he controlling issue is really the
conduct of the parties after they’ve entered into the
contract . . . while Bently [sic] claims this is their
asset, [it] does not include the [escrows as an asset]
in the bankruptcy action. Nothing speaks louder to
this Court to indicate to the Court, as far as Bently
[sic] was concerned, those escrows were not part of an
asset of Bently [sic].
In support of the trial court’s use of post-contractual
conduct to “interpret” the Contract, SK&R cites our decision in
Bott v. N. Snellenburg & Co., Inc., 177 Va. 331, 340, 14 S.E.2d
372, 375 (1941). We noted therein:
The well-recognized rule is that if a written instrument
may have two interpretations, the courts, in endeavoring
to determine the intention of the parties will follow
the one which they put upon it by their own actions.
As we noted above, however, there was no ambiguity in the
Contract, and its plain language conveyed only the defined
Property, which did not include the Escrows as a “development
right” or otherwise. As the plain meaning of the Contract yields
but one interpretation, the trial court erred in deeming Bentley’s
post-contractual conduct as evidence of an intent contrary to the
wording of the Contract. Where no "obscurity exists . . . the
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acts of the parties done under the contracts" bear no weight "as
an indication of their intention." Moore v. Chesapeake & O. R.
Co., 159 Va. 703, 730, 167 S.E. 351, 360 (1933) (citations
omitted).
IV. CONCLUSION
For the reasons set forth above, we hold that the trial
court erred in finding that Bentley’s failure to list the
Escrows as an asset in its bankruptcy proceeding precluded
assertion of a claim in this action. We also hold that the
trial court erred by failing to accord the Contract its plain
meaning, which did not transfer the Escrows either as Property
or as a development right. Further, the trial court erred in
its judgment that Denger had no claim to the Escrows.
Therefore, the judgment of the trial court will be reversed and
the case remanded for further proceedings in conformity with
this opinion to determine the ownership of the Escrows as
between Bentley and Denger.
Reversed and remanded.
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