Present: Carrico, C.J., Compton, Stephenson, Lacy, Keenan, and
Koontz, JJ., and Whiting, Senior Justice
STUARTS DRAFT SHOPPING CENTER, L.P.
OPINION BY
v. Record No. 951364 SENIOR JUSTICE HENRY H. WHITING
April 19, 1996
S-D ASSOCIATES
FROM THE CIRCUIT COURT OF AUGUSTA COUNTY
Thomas H. Wood, Judge
The primary issues in this appeal involve an alleged breach
of warranty in the sale of a shopping center and, if the warranty
was violated, a claimed waiver of that breach. Conforming to
well-settled appellate principles, we state the few disputed
facts in the light most favorable to the seller, who prevailed
before the jury.
In June 1988, Stuarts Draft Shopping Center, L.P., a limited
partnership (the buyer), contracted to buy Windmill Square
Shopping Center and an adjacent, unimproved parcel of land in
Stuarts Draft for $3,125,000 from S-D Associates, a general
partnership (the seller). An exhibit, attached to the contract
of sale, indicated the amounts required to be paid by the tenants
of the shopping center under their written leases. The contract
of sale required that at closing, the seller would deliver to the
buyer certificates from each tenant indicating that there were
"no concessions [or] rental abatements." Nevertheless, prior to
the closing, the seller made oral agreements with three of its
ten tenants to defer payment of part of the required monthly
rents because these tenants were not generating sufficient sales
volumes in this recently constructed shopping center to pay the
full monthly rents.
According to the buyer, a capitalization of the required
rents was the method by which it ascertained the value of this
shopping center, and the seller recognized that this method
"plays a large part" in determining the fair market value of
commercial property. The seller's assignment of the leases,
delivered at the closing, provided in pertinent part:
2. [Seller] represents and warrants . . . that
the Leases have not been modified, amended, altered or
supplemented in any manner, written or oral.
About eight days before the April 18, 1989 closing, the
buyer was advised that the three tenants were paying the amounts
required of them in the first year of their leases (the base
rents), but were not paying the increased amounts required of
them in the succeeding years of their leases. Further, a copy of
a rent roll the seller furnished to the buyer at closing showed
that these tenants were not even paying the full amounts of the
base rents. Charles L. Hall and Diana L. Hall were paying $500
of a required $875, Robert J. Grove and Robin K. Grove were
paying $817 of a required $934, and Robert G. Killingsworth was
paying $700 of a required $934.
After the closing, the Halls continued to pay the reduced
monthly rent, asserting that the seller had agreed to this
reduction in May or June preceding the closing. In support of
that contention, they produced a letter from Paul H. Coffey, Jr.,
an agent of the seller, stating that the seller
agreed to reduce your rent for six (6) months until
sales improved. At the end of this period we would
review your situation and decide where we would go from
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that point.
At no time did [the seller] agree to forego the
lease or any rights of the landlord under the lease.
Since the seller had taken no action to increase the reduced
monthly rent either at the end of the six months period or later,
the Halls continued to pay the reduced amount to the buyer.
Before suing the Halls for the arrearages that had accrued to it
after the closing, the buyer notified the seller that the
seller's agreement with the Halls was a modification of the lease
and, therefore, a breach of the warranty for which the buyer
would demand indemnification. The buyer later settled its claim
against the Halls for part of their alleged arrearages.
When the buyer demanded the rent due under the lease from
Killingsworth, that tenant also advised the buyer of the seller's
agreement to defer payment of part of his monthly rent payments.
Some months after the closing, Killingsworth agreed to pay, and
did pay, the rent required under his lease as well as the
arrearages that accrued after the closing. Later, the buyer
reduced Killingsworth's rent upon his agreement to extend the
lease for an additional period following its original term.
Without objection from the seller, the Groves paid only the
rent required in the first year of their lease, and not the
required increases in the second and third years of their lease,
partly because Mr. Grove was "local" and "kept an eye on the
[shopping] center." The buyer made no demand of the Groves to
increase their rent for the balance of the lease, which expired
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in February 1990.
Despite the buyer's prior notice of a claim for
indemnification, and its offset of other claims against the
seller in periodic payments of interest on a $140,000 purchase
money note, the buyer made no claim for a reduction of the
purchase price until January 23, 1992. At that time, the buyer
filed a two-count motion for judgment against the seller claiming
damages arising from the seller's alleged fraud and breach of
warranty in misrepresenting that the leases had not been modified
by the reduction of the rents stated therein. In September 1992,
the seller sued the buyer on its note and the buyer filed
defenses of breach of warranty and fraud.
After the court sustained the seller's plea of the statute
of limitations to the fraud count, it consolidated the buyer's
breach of warranty count for trial with the seller's action on
the note. The buyer unsuccessfully moved for judgment in its
favor on the breach of warranty count pretrial, at the close of
evidence, and following a jury's verdict returned against the
buyer and for the seller. In these motions, the buyer contended
that the evidence disclosed as a matter of law that the seller
had breached its warranty and that the buyer had no duty to
investigate the truth of the warranty. The buyer appeals the
judgment entered on the verdict.
BUYER'S BREACH OF WARRANTY CLAIM
On appeal, the buyer again asserts that the evidence
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establishes the seller's breach of warranty as a matter of law. 1
The seller admits that it had agreed to the temporary reductions
of the monthly rents. Nevertheless, it contends that these
agreements did not breach its warranty by modifying the leases
since the agreements were merely deferrals which did not affect
the lessees' liability for the resulting arrearages or for future
payment of the full rents specified in the leases.
In support of this contention, the seller argues that the
language relating to the modification of the leases was "unclear
and ambiguous," thereby creating an issue for the jury. However,
the seller does not indicate in what manner this language "admits
of being understood in more than one way or refers to two or more
things simultaneously . . . [or] is difficult to comprehend, is
of doubtful import, or lacks clearness and definiteness," the
indispensable elements of ambiguous language. Brown v. Lukhard,
1
We reject the seller's suggestion that the buyer's failure
to object to jury instructions on the breach-of-warranty issue
made it a jury question. The buyer's several motions made
before, during, and after the trial clearly preserved this issue
for appeal. See Code § 8.01-384. Thus, under the circumstances
of this case, the buyer need not have stated those objections
again when the jury instructions were discussed or given. See
Wright v. Norfolk & W. Ry. Co., 245 Va. 160, 168-70, 427 S.E.2d
724, 727-29 (1993).
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229 Va. 316, 321, 330 S.E.2d 84, 87 (1985) (citations omitted).
On brief, the seller merely states that "[t]he parties could not
agree as to the meaning of the warranty under the circumstances.
Paul Coffey testified that the warranty meant that the leases
were to be enforceable as written, [that] there was no legal
defense."
However, mere disagreement about the meaning of otherwise
unambiguous language does not make it ambiguous. Appalachian
Power Co. v. Greater Lynchburg Transit Co., 236 Va. 292, 295, 374
S.E.2d 10, 12 (1988). And we conclude that the seller's
"represent[ation] and warrant[y] . . . that the Leases have not
been modified, amended, altered or supplemented in any manner,
written or oral," clearly and unambiguously embraces the seller's
agreements to defer part of the monthly rent payments. (Emphasis
added.) Even though not releasing the tenants from ultimate
liability for the resulting arrearages or resumption of the full
rent payments required in their leases, these modifications of
the tenants' required performance of their leases were clearly
within the scope of the seller's warranty.
Accordingly, we apply the well-established rule that when a
contract is clear and unambiguous, the court, not the jury,
should decide the meaning of the disputed language. D.C.
McClain, Inc. v. Arlington County, 249 Va. 131, 135, 452 S.E.2d
659, 662 (1995). And in doing so in this case, the court should
have given effect to the clear and unambiguous language as
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written. Moore v. State Farm Mut. Auto. Ins. Co., 248 Va. 432,
434-35, 448 S.E.2d 611, 613 (1994). Applying this rule, we hold
that the seller's admitted rent concessions were modifications of
the leases and, therefore, breaches of its warranty.
Next, the seller contends that the jury could have
considered the breach of warranty to be immaterial. However, the
seller recognized that rent capitalization of commercial
property, such as its shopping center, plays "the biggest part"
in fixing its value. Given the buyer's uncontradicted testimony
that it relied upon these figures in fixing the value of the
shopping center, we conclude that the materiality of the breach
was shown as a matter of law. Therefore, the court erred in
submitting the issues of the seller's breach of warranty and its
materiality to the jury.
Even so, the seller contends that the jury could have found
the buyer was not damaged by the seller's breach of warranty.
According to the seller, "[i]f the three tenants paid according
to their lease . . . , or if [the buyer] got the equivalent, or
. . . changed a lease after closing, then the jury could
reasonably find no basis for damage." We need not consider this
contention because "[i]f an issue is erroneously submitted to a
jury, we presume that the jury decided the case upon that issue."
Clohessy v. Weiler, 250 Va. 249, 254, 462 S.E.2d 94, 98 (1995).
SELLER'S CLAIM OF BUYER'S WAIVER OF BREACH OF WARRANTY
The buyer claims that the evidence was insufficient to
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establish its alleged waiver of the seller's breach of warranty.
The seller responds that we cannot consider this claim since the
buyer did not object to the jury instructions on that issue. In
a letter written to the court five days before trial, with a copy
to seller's counsel, buyer's counsel contended that waiver was
not a jury issue. Additionally, in its pretrial motion for
summary judgment, the buyer noted that a failure to investigate
the truth of a warranty is no defense to an action predicated on
that breach. Therefore, the objection need not have been
repeated when the issue was submitted to the jury. Code § 8.01-
384. 2 Thus, we turn to the merits of this issue.
In the trial court and on appeal, the buyer cites Stanley's
Cafeteria v. Abramson, 226 Va. 68, 74, 306 S.E.2d 870, 873
(1983), in which we held that a party claiming waiver has the
burden of showing the two essential elements of waiver, namely
"knowledge of the facts basic to the exercise of the right
2
We need not consider the buyer's reliance upon Boykin v.
Hermitage Realty, 234 Va. 26, 30, 360 S.E.2d 177, 179 (1987), and
the buyer's argument that its failure to investigate the seller's
records could not affect its claim of fraud as a defense to
payment of the note. We find no record of any such contention in
the trial court, nor did the buyer object to the introduction of
evidence relating to the seller's defense of caveat emptor to the
buyer's fraud claim. Rule 5:25.
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[waived] and the intent to relinquish that right." Id. (quoting
Employers Ins. Co. v. Great American, 214 Va. 410, 412-13, 200
S.E.2d 560, 562 (1973)) (emphasis added). These elements must be
shown by "clear, precise and unequivocal evidence." 226 Va. at
74, 306 S.E.2d at 873 (quoting Utica Mutual v. National
Indemnity, 210 Va. 769, 773, 173 S.E.2d 855, 858 (1970)). The
buyer argues that the seller failed to carry this burden.
Although the evidence is sufficient to support a finding
that the buyer had knowledge of the rent reductions at the time
of closing, the seller recognizes that this knowledge and the
buyer's failure to protest or object to the breach are
insufficient to show that the buyer intended to relinquish its
right to sue the seller for its breach of warranty. However, the
seller contends that this intent is shown in (1) the buyer's
settlement of its claim against the Halls, (2) its failure to
"set-off the lost rents against the interest on the note, despite
use of set-off for other claims," and (3) its delay in asserting
its present claim. We disagree.
Again, we point out that the buyer's claims against the
Halls and the other tenants who had not paid the required rents
were based on the tenants' liability under the leases. Here, the
buyer's claim against the seller is based on the seller's
warranty and the consequent loss of value of the property because
of the seller's breach of that warranty. Therefore, the buyer's
dealings with those tenants did not affect its claim against the
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seller.
And although the buyer may have delayed in asserting its
breach of warranty claim, either by way of offset or by filing
its action, the seller cites no cases, and we have found none, in
which we have held that any such delay evinces an intentional
relinquishment of the buyer's rights. Indeed, we held in
Stanley's Cafeteria that although a delay in enforcing a
contractual right may show passive acquiescence in a partial
performance, that alone does not establish an intent to
relinquish the right to full performance. 226 Va. at 75, 306
S.E.2d at 874.
Perceiving no essential difference between the principles of
waiver applicable to a partial performance of a contract and
those applicable to its breach, we hold that the buyer's mere
delay in asserting its right did not evince an intent to
relinquish that right. Accordingly, we conclude that the court
also erred in submitting the issue of waiver to the jury.
In view of these rulings, we need consider only those
assignments of error regarding the court's failure to grant two
instructions which might be tendered in a new trial. The buyer's
proposed Instruction 29 reads in pertinent part, "[t]he measure
of the purchaser's damages is the value of the property at the
time the contract was broken minus the contract price." The
buyer recognizes that Instruction G, which was granted, could
have covered these claims. As pertinent, it states that the
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buyer could "recover as damages all the losses [it] sustained
including gains prevented which are a direct and natural result
of the breach [of warranty]." However, given the seller's
argument, made before the jury and throughout this case, that the
buyer's damages could only be its loss of rents, we think the
jury should have been instructed regarding the buyer's loss in
the value of the property. Accordingly, if the evidence and
contentions are similar on retrial, the theory encompassed in
Instruction 29 should be covered in an appropriate instruction.
Proposed Instruction 28 defined constructive fraud.
According to the buyer, the jury should have been given this
instruction since it may have concluded that the seller's
"failure to provide correct rent amounts to [the buyer] was
simply a mistake by its real estate agent." We agree with the
seller that there was no evidence presented of innocent or
mistaken misrepresentation; the evidence was confined to that of
the seller's knowing misrepresentation of the rents. Therefore,
we conclude that the instruction was properly refused.
In summary, we will reverse the judgment of the court
because of its error in submitting the issues of breach of
warranty and waiver to the jury. We will remand the case for a
new trial in conformity with this opinion.
Reversed and remanded.
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