Horton v. Horton

Present: All the Justices

ANNA LEE HORTON

v. Record No. 961176 OPINION BY JUSTICE BARBARA MILANO KEENAN
June 6, 1997
HOWARD P. HORTON

FROM THE CIRCUIT COURT OF CLARKE COUNTY
James L. Berry, Judge

In this appeal, we consider whether a plaintiff's breach of

contract was material, barring her recovery for the defendant's

nonperformance of the contract.
Anna Lee Horton and Howard P. Horton were married in July

1984, and executed a contract in July 1991 (the 1991 contract).

Mrs. Horton filed a motion for judgment against Mr. Horton in

1995, seeking damages for his failure to comply with the 1991

contract. Mr. Horton filed a counterclaim, alleging damages

resulting from Mrs. Horton's breach of contract.

The trial court heard the following evidence in a three-day

bench trial. In May 1989, Mr. Horton entered into a joint

venture agreement with Charles and Elaine Longerbeam for the

development and sale of lots in "Carlisle Heights," a subdivision

in Frederick County. Mrs. Horton was not a partner in the joint

venture.

The Longerbeams decided to terminate their joint venture

with Mr. Horton due to the Hortons' marital difficulties. In

January 1991, a dissolution agreement was drafted which provided

that the Longerbeams and Mr. Horton would each take sole title to

one-half the lots in Carlisle Heights. The Longerbeams were

advised by counsel to obtain Mrs. Horton's signature on the
agreement for reasons unrelated to this case. Mrs. Horton's

refusal to sign the document postponed execution of the agreement

until May 1991, when Mr. Horton and the Longerbeams signed the

document. Mrs. Horton did not sign the agreement with the other

three parties at that time.

On July 10, 1991, Mr. and Mrs. Horton executed the 1991

contract. This contract required Mrs. Horton to sign the joint

venture dissolution agreement, and to execute a power of attorney

appointing M. Tyson Gilpin, Jr., her attorney, to sign certain

documents on her behalf, including the deeds to the Longerbeams

and deeds to complete the sale of other lots.
The 1991 contract provided that the net proceeds from an

anticipated sale of eleven lots, as well as from the future sale

of other lots, would be deposited into an escrow account, from

which the escrow agents would make payments due Mrs. Horton under

the contract. Pursuant to the contract, Mr. Horton was

obligated, to the extent he was financially able to do so, to

supplement the escrow account if its assets were not sufficient

to meet the periodic payments due Mrs. Horton.

Mrs. Horton signed the joint venture dissolution agreement

on July 17, 1991, but she did not execute the power of attorney

despite Mr. Horton's repeated requests. However, Mrs. Horton

signed several "form" deeds and left them with Gilpin. When Mr.

Horton sold a lot in Carlisle Heights, the settlement attorney

notified Gilpin, who entered the legal description of the lot on

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the signed deed and delivered the deed to the settlement

attorney. Before each settlement, Mr. Horton requested that Mrs.

Horton sign the power of attorney required by the 1991 contract.

In 1993, Mrs. Horton stopped signing the "form" deeds and

began attending the real estate settlements. At the settlements,

Mrs. Horton examined the documents and questioned the propriety

of various provisions if they did not correspond to her

interpretation of the 1991 contract.
Edwin B. Yost, an attorney who conducted the settlements on

Mr. Horton's lots in Carlisle Heights, testified that Mrs.

Horton's involvement in the settlement proceedings delayed the

original settlement date for several of the lots because the

parties were forced to wait for her signature. Yost also stated

that, based on these delays, his clients began purchasing lots

from the Longerbeams, even though the clients initially had

conducted business with Mr. Horton. At that time, Mr. Horton was

attempting to sell his lots for at least $2,000 less than the

price of the Longerbeams' lots.

Mr. Horton supplemented the escrow account from his personal

funds for three months in 1991, for four months in 1992, and for

two months in 1993. However, beginning in May 1993, Mr. Horton

refused to make any further supplemental payments to the account

even though the account continued to have insufficient funds to

pay all the expenses required by the 1991 contract. Mr. Horton

did not further supplement the account. Mrs. Horton then filed

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this motion for judgment against Mr. Horton, alleging that he

materially breached the 1991 contract by failing to supplement

the escrow account.

Mr. Horton filed a counterclaim, alleging that Mrs. Horton

had breached the agreement by failing to sign the power of

attorney, and by intentionally interfering with the lot sales.

He alleged that her conduct resulted in a substantial loss of

sales and profits.
The trial court concluded that Mrs. Horton's "attendance at

the closings and failure to sign the deeds promptly caused Mr.

Yost's clients to begin buying Longerbeam lots in preference to

the less expensive Horton lots." The trial court entered

judgment for Mr. Horton on the motion for judgment, ruling that

although Mrs. Horton's failure to sign the joint venture

dissolution agreement before July 1991 could not be considered a

breach of the 1991 contract since it was not yet in existence,

her failure to sign the power of attorney required by the 1991

contract constituted a material breach of that contract. The

trial court did not rule on Mr. Horton's counterclaim.

On appeal, Mrs. Horton contends that her failure to sign the

power of attorney was not a material breach of the 1991 contract

because she fulfilled the purpose of that requirement by signing

the "form" deeds. She further asserts that there is no evidence

that her attendance at the settlements or her delay in signing

any deeds resulted in the loss of lot sales. Mrs. Horton

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contends that by proceeding with the sale of the lots, Mr. Horton

accepted her substituted performance of signing "form" deeds, and

that this acceptance relieved her of the obligation to sign the

power of attorney. Finally, Mrs. Horton argues that even if she

did breach the contract, the trial court erred in relieving Mr.

Horton of his own obligations under the contract and in failing

to award both parties their respective damages.

In response, Mr. Horton asserts that there was sufficient

evidence for the trial court to conclude that Mrs. Horton's

failure to sign the power of attorney was a material breach of

the 1991 contract. Mr. Horton argues that the purpose of that

contract was to facilitate lot sales and to avoid Mrs. Horton's

interference in the settlement proceedings. He contends that the

evidence showed that Mrs. Horton defeated this purpose by

delaying the settlements to such an extent that potential

purchasers ceased doing business with him, and bought similar,

but more expensive, lots from the Longerbeams. We agree with Mr.

Horton.
On appeal, we review the evidence in the light most

favorable to Mr. Horton, the prevailing party at trial. Tuomala

v. Regent University, 252 Va. 368, 375, 477 S.E.2d 501, 505

(1996); W.S. Carnes, Inc. v. Chesterfield County, 252 Va. 377,

385, 478 S.E.2d 295, 301 (1996). Since the trial court heard the

evidence ore tenus, its findings based on an evaluation of the

testimony have the same weight as a jury verdict. Tuomala, 252

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Va. at 375, 477 S.E.2d at 505-06; RF&P Corporation v. Little, 247

Va. 309, 319, 440 S.E.2d 908, 915 (1994). Under Code § 8.01-680,

we will uphold the trial court's judgment unless it appears from

the evidence that the judgment is plainly wrong or without

evidence to support it. Tuomala, 252 Va. at 375, 477 Va. at 506;

W.S. Carnes, Inc., 252 Va. at 385, 478 S.E.2d at 301.

Generally, a party who commits the first breach of a

contract is not entitled to enforce the contract. Federal
Insurance Co. v. Starr Electric Co., 242 Va. 459, 468, 410 S.E.2d

684, 689 (1991); Hurley v. Bennett, 163 Va. 241, 253, 176 S.E.

171, 175 (1934). An exception to this rule arises when the

breach did not go to the "root of the contract" but only to a

minor part of the consideration. Federal Insurance Co., 242 Va.

at 468, 410 S.E.2d at 689; Neely v. White, 177 Va. 358, 366, 14

S.E.2d 337, 340 (1941).

If the first breaching party committed a material breach,

however, that party cannot enforce the contract. See Neely, 177

Va. at 366-67, 14 S.E.2d at 341. A material breach is a failure

to do something that is so fundamental to the contract that the

failure to perform that obligation defeats an essential purpose

of the contract. See Ervin Construction Co. v. Van Orden, 874

P.2d 506, 510-11 (Idaho 1993); Cady v. Burton, 851 P.2d 1047,

1052 (Mont. 1993); Management Computer Services Inc. v. Hawkins,

Ash, Baptie & Co., 557 N.W.2d 67, 77-78 (Wis. 1996). If the

initial breach is material, the other party to the contract is

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excused from performing his contractual obligations. See Neely,

177 Va. at 367, 14 S.E.2d at 341; Bernstein v. Nemeyer, 570 A.2d

164, 168 (Conn. 1990); Eager v. Berke, 142 N.E.2d 36, 39 (Ill.

1957); Quintin Vespa Co. v. Construction Service Co., 179 N.E.2d

895, 899 (Mass. 1962); Gulf South Capital Corp. v. Brown, 183

So.2d 802, 804-805 (Miss. 1966); Management Computer Services,

Inc., 557 N.W.2d at 77.

Here, as consideration for the contract, Mrs. Horton was

required to sign two documents, the joint venture dissolution

agreement and the power of attorney. The evidence showed that

the purpose of the power of attorney, and an essential purpose of

the contract itself, was to facilitate lot closings by ensuring

Mrs. Horton's cooperation in the settlement proceedings. As Mr.

Horton and Yost testified, Mrs. Horton's refusal to sign the

power of attorney and her interference in the settlement

proceedings delayed lot closings and led to the loss of potential

lot sales.
We disagree with Mrs. Horton's argument that a material

breach was not proved since Mr. Horton failed to establish an

amount of damages actually incurred as a result of her conduct.

The type of evidence required to establish a material breach of

contract will vary depending on the facts surrounding a

particular contract. See Restatement (Second) of Contracts § 241

cmt. a (1979). In many cases, a material breach is proved by

establishing an amount of monetary damages flowing from the

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breach. See, e.g., Federal Insurance Co., 242 Va. at 468, 410

S.E.2d at 689. However, proof of a specific amount of monetary

damages is not required when the evidence establishes that the

breach was so central to the parties' agreement that it defeated

an essential purpose of the contract. See, e.g., J.P. Stravens

Planning Associates, Inc. v. City of Wallace, 928 P.2d 46, 49

(Idaho Ct. App. 1996); Rogers v. Relyea, 601 P.2d 37, 40-41

(Mont. 1979); Macon Mining & Manufacturing, Inc. v. Lasiter, 658

P.2d 505, 507 (Or. Ct. App. 1983). As noted above, there was

sufficient evidence to support the trial court's conclusion that

Mrs. Horton's breach defeated an essential purpose of the

contract. Thus, Mr. Horton proved a material breach of contract

which excused his nonperformance and prevented Mrs. Horton from
*
enforcing the contract. See Neely, 177 Va. at 367, 14 S.E.2d at

341; Hurley, 163 Va. at 253, 176 S.E. at 175.

Mrs. Horton contends, however, that Mr. Horton accepted her

performance of signing "form" deeds, and thus waived his right to

assert her failure to sign the power of attorney as a defense to

his nonperformance. We disagree.

A party claiming waiver must show a "knowledge of the facts
*
We also disagree with Mrs. Horton's contention that the
trial court ruled she breached the 1991 contract by failing to
sign the joint venture dissolution agreement in May 1991.
Although the trial court stated that Mrs. Horton's delay in
signing the joint venture dissolution agreement "permitted the
avoidance of the eleven lot transactions," whose sale was pending
prior to the execution of the 1991 contract, the court did not
rule that her conduct prior to the signing of the 1991 contract
constituted a material breach of that contract.

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basic to the exercise of the right [waived] and the intent to

relinquish that right." Stuarts Draft Shopping Ctr. v. S-D

Associates, 251 Va. 483, 489-90, 468 S.E.2d 885, 889 (1996)

(citation omitted); Stanley's Cafeteria v. Abramson, 226 Va. 68,

74, 306 S.E.2d 870, 873 (1983). Acceptance of defective

performance, without more, does not prove intent to relinquish

the right to full performance. Id. at 74, 306 S.E.2d at 873; see

5 Samuel Williston & Walter H.E. Jaeger, A Treatise on the Law of
Contracts § 700 (3d ed. 1961).

Here, the evidence affirmatively showed that Mr. Horton did

not intend to relinquish his contractual right to secure a power

of attorney from Mrs. Horton. As stated above, before each

settlement, Mr. Horton requested that Mrs. Horton sign the power

of attorney as required by the 1991 contract. These repeated

requests establish that Mr. Horton did not waive his right to

assert Mrs. Horton’s failure to sign the power of attorney as an

excuse for his nonperformance.

Finally, we find no merit in Mrs. Horton's argument that the

trial court rescinded or nullified the contract when the court

should have awarded Mr. Horton damages for any losses he

sustained as a result of her breach. The trial court did not

rescind or nullify the contract, but ruled that Mrs. Horton's

material breach of the contract excused Mr. Horton's

nonperformance. As Mrs. Horton's counsel acknowledged in oral

argument before this Court, a party who has materially breached a

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contract is not entitled to recover damages for the other party’s

subsequent nonperformance of the contract.

For these reasons, we will affirm the trial court's

judgment.

Affirmed.

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