Present: All the Justices
STEFAN C. LONG
v. Record No. 961815 OPINION BY JUSTICE BARBARA MILANO KEENAN
June 6, 1997
FRANCESCO ABBRUZZETTI
FROM THE CIRCUIT COURT OF THE CITY OF ALEXANDRIA
Thomas A. Fortkort, Judge Designate
The dispositive issue in this appeal is whether a plaintiff
who recovered consequential damages for breach of contract
presented sufficient evidence that those damages were within the
contemplation of the parties at the time the contract was made.
Francesco Abbruzzetti (the plaintiff) filed a motion for
judgment against Stefan C. Long, seeking damages for Long's
alleged breach of his oral contract to act as escrow agent for
the plaintiff and his former wife, Josephine Wendy Abbruzzetti.
The plaintiff and Long filed cross-motions for summary judgment
and agreed, pursuant to Rule 3:18, that the trial court could
consider certain depositions, in addition to the pleadings and
admissions, in deciding the case.
The trial court considered the following facts in ruling on
the motions. On October 6, 1992, at 3:45 p.m., the plaintiff and
Mrs. Abbruzzetti executed an "Offer to Purchase," in which the
plaintiff agreed to purchase Mrs. Abbruzzetti's interest in their
jointly owned restaurant, Trattoria da Franco, located in the
City of Alexandria. The Offer to Purchase and an accompanying
escrow agreement executed by the plaintiff and Mrs. Abbruzzetti
required the plaintiff to deliver to Long, the escrow agent who
was also Mrs. Abbruzzetti's attorney, several items including a
cash down payment, a note payable to Mrs. Abbruzzetti for the
balance of the purchase price, and evidence of Mrs. Abbruzzetti's
release from liability on notes held by the Bank of Alexandria
and the First Commonwealth Savings Bank. The Offer to Purchase
specified that "[a]ll parties agree to execute all required
documents within 72 HRS of execution of this agreement," and
stated that if the plaintiff was unable to perform in accordance
with the agreement, it would become null and void, and an
alternate agreement allowing Mrs. Abbruzzetti to purchase the
restaurant would take effect.
On October 6, 1992, the plaintiff delivered the down payment
to Long, who deposited the check in his escrow account. The
escrow agreement directed Long to release the down payment to
Mrs. Abbruzzetti when he received all the documents required from
the plaintiff under the terms of the Offer to Purchase. On
October 9, 1992, Long received from Charles O. Cake, the
plaintiff's attorney, several items including letters from the
Bank of Alexandria and First Commonwealth Savings Bank, which
indicated that the plaintiff had initiated, but not completed,
action to assume full responsibility for the two loans.
On October 9, 1992, at about 4:00 p.m., Mrs. Abbruzzetti
delivered a letter to Long stating that the plaintiff had failed
to comply with the terms of the Offer to Purchase because he had
not obtained her release on the notes held by the two banks, and
she presented written verification from both banks to that
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effect. At Mrs. Abbruzzetti's request, Long wrote the plaintiff
a letter stating that "[i]t has been brought to my attention that
you have failed to comply with the offer to purchase." Long
stated in the letter that Mrs. Abbruzzetti was exercising her
option to purchase the restaurant and that, "[p]ursuant to her
offer of purchase, she is entitled to assume control of the
family business forthwith." Long gave the letter to Mrs.
Abbruzzetti.
Long stated in his deposition that he did not make an
independent attempt to verify the contents of the bank letters
because he had not received the releases within the 72-hour time
period specified in the Offer to Purchase. When asked if he
"simply took [Mrs.] Abbruzzetti's word," Long stated, "[a]ll I
know is she said 72 hours had expired and that he had not
complied."
Mrs. Abbruzzetti delivered a copy of Long's letter to Cake
and then went to the restaurant, bringing the letter and her
check for the down payment to exercise her purchase option. She
was accompanied by two security guards she had hired that
morning. The plaintiff arrived at the restaurant a few hours
after Mrs. Abbruzzetti and became angry when she informed him
that she was taking possession of the restaurant. The plaintiff
left the restaurant and returned with two policemen who
determined, on the basis of Long's letter, that Mrs. Abbruzzetti
was entitled to possession of the business. The plaintiff left
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the restaurant and later filed a suit for specific performance of
the Offer to Purchase.
In January 1993, in the suit for specific performance, the
trial court entered an order granting the plaintiff immediate
possession of the restaurant, holding that he had complied with
the terms of the October 6, 1992 Offer to Purchase. The
plaintiff then filed this motion for judgment against Long,
seeking recovery of the attorney's fees he expended in the
specific performance suit.
In a letter opinion addressing the parties' cross-motions
for summary judgment, the trial court held that the plaintiff was
entitled to damages for Long's "failure to investigate the
default circumstances claimed by his client." The court ruled
that although Long did not have any specific knowledge of Mrs.
Abbruzzetti's intended actions beyond her intent to deliver the
letter and check to the plaintiff's attorney, "it was clearly
foreseeable that she would make some effort to enforce her claim
and that such effort would cause the plaintiff some damage either
in business losses or potential attorney fees in defending
against Mrs. Abbruzzetti's claim." The court awarded summary
judgment to the plaintiff, ruling that Long's failure to
investigate the plaintiff's alleged default under the terms of
the Offer to Purchase entitled the plaintiff to recover his
attorney's fees incurred in the specific performance suit. *
*
The court awarded the plaintiff $42,785. Long stipulated
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On appeal, Long contends that the attorney's fees incurred
in the specific performance suit were consequential damages not
reasonably foreseeable at the time his contract as escrow agent
was made, because those damages were the direct result of Mrs.
Abbruzzetti's action ousting the plaintiff from the restaurant.
In response, the plaintiff asserts that the attorney's fees were
damages directly flowing from Long's breach of contract, and that
the resolution of this issue is governed by Hiss v. Friedberg,
201 Va. 572, 112 S.E.2d 871 (1960). In the alternative, the
plaintiff asserts that even if the attorney's fees were
consequential damages, they are recoverable because they were
reasonably foreseeable at the time the contract was made. We
disagree with the plaintiff.
As stated above, this case was submitted to the trial court
based on the parties' cross-motions for summary judgment. Since
the parties agreed to the trial court's consideration of certain
depositions as evidence, we are required to consider them as part
of the record the parties have presented. See Code § 8.01-420;
Rule 3:18; Carson v. LeBlanc, 245 Va. 135, 137, 427 S.E.2d 189,
190 (1993). In this procedural posture, we review the trial
court's judgment under Code § 8.01-680, which provides that the
judgment will not be set aside unless it appears from the record
to the amount of damages while reserving the right to appeal on
the issue of liability.
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that the judgment is plainly wrong or without evidence to support
it. Id.; see also W.S. Carnes, Inc. v. Board of Supervisors of
Chesterfield County, 252 Va. 377, 385, 478 S.E.2d 295, 301
(1996); Ravenwood Towers, Inc. v. Woodyard, 244 Va. 51, 57, 419
S.E.2d 627, 630 (1992).
There are two broad categories of damages which may arise
from a breach of contract. Direct damages are those which flow
naturally or ordinarily from the contract breach. Consequential
damages occur from the intervention of special circumstances
that are not ordinarily predictable. NAJLA Associates, Inc. v.
Griffith, 253 Va. 83, 86, 480 S.E.2d 492, 494 (1997); Richmond
Medical Supply Co. v. Clifton, 235 Va. 584, 586, 369 S.E.2d 407,
409 (1988); Roanoke Hospital v. Doyle and Russell, 215 Va. 796,
801, 214 S.E.2d 155, 160 (1975).
If damages are direct, they are compensable. In contrast,
if damages are consequential in nature, they are compensable only
if the special circumstances were within the contemplation of all
contracting parties at the time the contract was made. NAJLA
Associates, Inc., 253 Va. at 86-87, 480 S.E.2d at 494; Morris v.
Mosby, 227 Va. 517, 523, 317 S.E.2d 493, 497 (1984).
"Contemplation," in this context, includes both circumstances
that are actually foreseen and those that are reasonably
foreseeable. Richmond Medical Supply Co., 235 Va. at 586, 369
S.E.2d at 409; Danberg v. Keil, 235 Va. 71, 76, 365 S.E.2d 754,
757 (1988).
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The issue whether damages are direct or consequential is a
question of law. However, the issue whether special
circumstances were within the contemplation of the parties is a
question of fact. NAJLA Associates, Inc., 253 Va. at 87, 480
S.E.2d at 494; Roanoke Hospital, 215 Va. at 801, 214 S.E.2d. at
160.
We disagree with the plaintiff's assertions that the damages
here are direct, rather than consequential, and that this case is
controlled by Hiss v. Friedberg. In Hiss, the plaintiffs
employed attorneys Hiss and Rutledge to search the title to their
recently purchased real estate, procure title insurance, and
settle the transaction. Due to an allegation of an unrecorded
lease on the property, an escrow agreement was executed in which
Hiss and Rutledge were authorized to deliver the cash and notes
to the sellers, and to record the deeds, when they had received a
title insurance policy guaranteeing the plaintiffs a fee simple
title to the property "free and clear of any liens and
encumbrances whatsoever." 201 Va. at 574-75, 112 S.E.2d at 874.
Although they had not procured such a policy, Hiss and
Rutledge nevertheless recorded the deeds and delivered the cash
and notes to the sellers. The policy issued after these acts
occurred did not insure against "[r]ights of parties in actual
possession of all or any part of the premises other than the
insured." Id. at 575, 112 S.E.2d at 874.
After filing suit against the sellers for breaches of
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warranty and covenants, the plaintiffs settled their claim,
reserving the right to proceed against Hiss and Rutledge. In the
action against Hiss and Rutledge, the trial court awarded the
plaintiffs, among other things, counsel fees incurred in their
litigation against the sellers. Id. at 575-76; 112 S.E.2d at
874.
On appeal, we recognized that, in the absence of contractual
or statutory liability, attorneys' fees incurred in present or
previous litigation between the same parties generally are not
recoverable. However, we also stated that when a breach of
contract has forced a plaintiff to maintain or defend a suit
against a third person, the plaintiff may recover reasonable
attorneys' fees incurred by him in the former suit. Id. at 577,
112 S.E.2d at 875-76. We concluded that since the purchasers'
suit against the sellers was a direct and necessary consequence
of the attorneys' breach, the plaintiffs were entitled to recover
damages for the attorneys' fees they incurred in that litigation.
Id. at 579, 112 S.E.2d at 876-77.
Unlike the direct damages sustained by the plaintiffs in
Hiss, the damages alleged here were not the direct and necessary
consequence of Long's alleged breach of contract as escrow agent.
The damages were the direct and necessary result of Mrs.
Abbruzzetti's action in having the plaintiff physically ejected
and barred from the restaurant. Moreover, it is purely
speculative whether such fees would have been incurred had Mrs.
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Abbruzzetti not taken this action. Thus, we conclude that the
plaintiff's attorney's fees in the specific performance suit were
consequential, rather than direct, damages because they arose
from the intervention of special circumstances not ordinarily
predictable.
We next consider whether the record supports the trial
court's finding that these damages were reasonably foreseeable.
We apply the above-stated rule that the foreseeability of
consequential damages is determined as of the time the contract
was made. See NAJLA, 253 Va. at 87, 480 S.E.2d at 494; Richmond
Medical Supply Co., 235 Va. at 586, 369 S.E.2d at 409; Roanoke
Hospital, 215 Va. at 801, 214 S.E.2d at 160.
We conclude that the record does not contain evidence that,
at the time Long was employed as escrow agent, it was reasonably
foreseeable that Mrs. Abbruzzetti's actions would require the
plaintiff to incur attorney's fees in a specific performance
suit. There is no evidence indicating that Mrs. Abbruzzetti had
engaged in such conduct before, or that the circumstances
surrounding the parties' marital difficulties were so extreme
that conduct of this nature was reasonably likely to occur.
Thus, we hold that the record fails to support the trial court's
conclusion that the damages in question were reasonably
foreseeable.
For these reasons, we will reverse the trial court's
judgment and enter final judgment in favor of Long.
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Reversed and final judgment.
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