Present: All the Justices
WILLIAM R. SHEPHERD, JR.,
v. Record No. 020188
RICHARD F. DAVIS, ET AL. OPINION BY
JUSTICE CYNTHIA D. KINSER
January 10, 2003
JOHN T. HENNING, ET AL.
v. Record No. 020189
RICHARD F. DAVIS, ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF VIRGINIA BEACH
Edward W. Hanson, Jr., Judge
These consolidated appeals concern a parcel of real
estate that is subject to a lease agreement granting the
lessee both a fixed-price option to purchase the tract of
real estate and a right of first refusal. Such provisions
are generally referred to as a “dual option.” One of the
issues presented in this appeal concerns the interplay
between those two provisions when a third party offered to
purchase the subject property and the lessee failed to
exercise the right of first refusal, attempting instead to
invoke the fixed-price option. Additional questions are
whether the third-party offeror was entitled to specific
performance and, if not, what amount of damages was
appropriate. Because we find no error in the chancellor’s
decrees holding that the lessee forfeited his contractual
rights by failing to exercise the right of first refusal,
and awarding only nominal damages to the third-party
offeror, we will affirm those decrees.
I. MATERIAL FACTS AND PROCEEDINGS
Richard F. and Amelia D. Davis (the Davises) entered
into a contract with George J. Parker (Parker or the Parker
Estate) in 1981 to purchase a parcel of real estate located
a short distance south of Virginia Beach Boulevard in the
City of Virginia Beach. Under the terms of the purchase
contract and a separate indenture agreement between the
parties, the Davises would receive title to the property
upon payment in full of the deferred purchase price. The
final amortized payment was not due until April 2015. 1
Notably, the purchase contract contained neither an
acceleration clause nor a provision allowing prepayment of
the purchase price. The contract also prohibited the
Davises from conveying their interests in the real estate
or assigning the purchase contract without the prior
consent of Parker, but provided that they could, with
Parker’s consent, assign their interests in the contract to
“an assignee of adequate financial capability.”
1
In 1990, the Davises borrowed additional money, which
increased the amount of their deferred obligation and
extended the payments to 2015.
2
In July 1993, the Davises leased this same parcel of
real estate to William R. Shepherd, Jr. (Shepherd), for an
initial term of five years. The lease agreement contained
provisions granting Shepherd both a fixed-price option to
purchase and a right of first refusal. 2 This dual option
pertained not only to the leased parcel of real estate
(referred to as “Parcel 1” in the lease agreement), but
also to an adjacent parcel of real estate owned by the
Davises (referred to as “Parcel 2” in the lease agreement)
(collectively designated the “Property”). The relevant
sections of the lease creating the dual option state the
following:
23. OPTION TO PURCHASE AND RIGHT OF FIRST
REFUSAL
23.1. Option. Upon compliance with the
provisions of this Section 23, Tenant shall have
the sole and exclusive Option to purchase the
Property pursuant to the terms of this Agreement
for the continuous period of time commencing on
the Commencement Date and ending on the date the
lease terminates. If the Option is properly and
timely exercised, as provided in this Agreement,
a contract shall then exist between Landlord and
Tenant pursuant to which Landlord agrees to sell
and Tenant agrees to buy the Property upon the
terms and conditions specified in this Section
23.
2
A “Memorandum of Option” was allegedly recorded in
the Clerk’s Office of the Circuit Court of the City of
Virginia Beach. That document is not part of the record in
this case.
3
23.2. Exercise of Option. The Option may
be exercised, subject to the terms of paragraph
23.8, by Tenant at any time prior to the
expiration of the Lease, which shall be midnight
of the last day this lease is in effect. Tenant
shall exercise the Option by sending written
notice to Landlord prior to the expiration date
of the Option specifying Tenant’s desire to
exercise the Option.
23.3. Purchase Price. The purchase price
(“Purchase Price”) to be paid by Tenant to
Landlord for the Property shall be ONE HUNDRED
FIFTY THOUSAND AND NO/100 DOLLARS
($150,000.00)[.]
23.4. Title. Landlord shall convey to Tenant,
at Closing, good, indefeasible and marketable title
to the Property, free and clear of all liens,
encumbrances and easements, other than those to
which the Tenant fails to object . . . .
. . . If Landlord is unwilling or unable to
correct such objections within [thirty days,]
Tenant shall have the option of taking such title
as Landlord can give without abatement of the
Purchase Price, or terminating this Agreement[.]
* * * *
23.11. Right of First Refusal.
Notwithstanding anything contained in this
Agreement to the contrary, if Landlord shall
receive from a third party (“Offeror”) a bona
fide written offer to purchase the Property, or
any part of it, Landlord shall send to Tenant a
copy of the proposed offer (“Offer”), with
notification that Landlord intends to accept the
Offer. Tenant shall have the right within ten
(10) days thereafter to exercise the Option to
purchase the Property, or such part of it
described in the Offer, pursuant to the terms and
conditions contained in the Offer. If Tenant
does not elect to purchase the Property or such
part of it described in the Offer, within such
five (5) day period, Landlord may sell the
Property or the part described in the Offer to
the Offeror. If Landlord does not sell the
4
Property or any part of it, according to the
Offer, then Tenant’s right of first refusal shall
remain in full force.
Almost five years later, in March 1998, John T.
Henning and David J. Cross (Henning/Cross), who jointly
owned a parcel of real estate adjoining the Property to the
west, offered to buy the Property for $175,000. As
specified in the ensuing agreement between Henning/Cross
and the Davises, the purchase of the Property was
contingent upon vacation of the lot line between the
Property and the Henning/Cross parcel. The terms of the
agreement also acknowledged that Shepherd had an option to
purchase and a right of first refusal with respect to the
Property. Accordingly, the Davises, through their
attorney, transmitted the Henning/Cross offer (the “Offer”)
to Shepherd in accordance with the requirements of
Paragraph 23.11 of their lease with Shepherd. Shepherd
elected not to exercise his right of first refusal because
the terms of the Offer were not acceptable to him.
Instead, he attempted to exercise his fixed-price option to
purchase the Property.
Despite repeated demands from both Shepherd and
Henning/Cross, the Davises refused to close on either
5
agreement. 3 Consequently, Shepherd and Henning/Cross filed
separate bills of complaint for specific performance of
their respective agreements with the Davises. The Davises
defended both suits on the basis that it was impossible for
them to perform under the terms of either agreement
because, pursuant to their purchase contract with Parker,
they did not yet own marketable title to Parcel 1.
The matters were consolidated and referred to a
commissioner in chancery for presentation of evidence and
the submission of a report to a chancellor. The issues
before the commissioner were: (1) whether Shepherd could
purchase the Property pursuant to his fixed-price option or
whether, having failed to exercise his right of first
refusal, Shepherd lost that option; (2) whether
Henning/Cross were entitled to specific performance of
their agreement with the Davises; (3) whether the Davises
were excused from fulfilling their obligations under either
agreement based on the defense of impossibility; (4)
whether the Davises’ rights under the purchase contract
with Parker could be assigned; and (5) whether either
Shepherd or Henning/Cross were entitled to damages and an
award of attorney fees, and if so, in what amounts.
3
The Parker Estate apparently had refused to accept
prepayment of the purchase price by the Davises.
6
After hearing evidence, the commissioner issued his
report, finding that the “first refusal clause [was]
obviously intended to override the option clause, since it
[began] with the language ‘[n]otwithstanding anything
contained in this Agreement to the contrary . . . .’ ”
Concluding that the Henning/Cross Offer to purchase the
Property was a “ ‘bona fide offer’ ” not made for any
improper purpose, the commissioner determined that
“Shepherd was required to respond to the right of first
refusal, and was not entitled to ignore it by preferring
the option.” 4
The Commissioner further concluded that, although the
Henning/Cross agreement was “valid and facially
enforceable” and had been breached by the Davises, the
agreement could not be specifically enforced because it was
presently impossible for the Davises to convey marketable
title. Their purchase contract with Parker did not contain
an acceleration clause or provision allowing prepayment of
the purchase price. Nor did it allow an assignment of the
Davises’ interests without Parker’s consent, and there was
no evidence of such consent. Thus, the commissioner
4
Shepherd and the Davises entered into a lease
amendment one day after the lease expired. The
commissioner found that this document “conferred no further
7
declined to recommend an assignment of the Davises’
interests under their purchase contract with Parker.
However, the commissioner stated that “while
impossibility is a defense to specific performance, it is
no defense to liability for contractual damages.”
Consequently, the commissioner recommended an award of
damages in the amount of $376,430 to Henning/Cross as well
as attorney fees and costs. The commissioner also
recommended a reimbursement of certain sums paid by
Shepherd to the Davises in his attempt to exercise his
fixed-price purchase option and to protect his position.
All the parties filed exceptions to the commissioner’s
report. Upon considering those exceptions, the chancellor
confirmed the commissioner’s findings except those
concerning the reimbursement of certain payments to
Shepherd, the award of damages to Henning/Cross, and the
issue of attorney fees. The chancellor re-referred those
matters to the commissioner.
After hearing additional evidence, the commissioner
submitted a supplemental report. Having learned for the
first time that the Davises actually owned Parcel 2 of the
Property, the commissioner addressed not only the question
rights, and failed to resurrect those which had been
forfeited.”
8
whether either Shepherd or Henning/Cross was entitled to an
award of damages but also the question whether specific
performance could be ordered as to Parcel 2. With regard
to the latter question, the commissioner concluded that
specific performance was not appropriate because Parcel 2,
by itself, is “landlocked” and because an order directing
the Davises to convey solely that parcel would be
tantamount to creating a new contract for the parties.
On the issue of damages, the commissioner recommended
no award of damages to Shepherd because the commissioner
concluded that, having first failed to exercise his right
of first refusal, Shepherd forfeited his other contractual
rights. As to Henning/Cross, the commissioner recommended
an award of only “nominal damages” to include their costs
and attorney fees related to this litigation and any other
“out of pocket expenses which would be ‘restitutionary.’ ”
Relying on this Court’s decisions in Davis v. Beury, 134
Va. 322, 114 S.E. 773 (1922), and Chesapeake Builders, Inc.
v. Lee, 254 Va. 294, 492 S.E.2d 141 (1997), the
commissioner reasoned that, in order to recover damages for
the “ ‘benefit of the bargain,’ ” Henning/Cross had to
prove one of the following elements: (1) that the Davises
acted in bad faith; (2) that the Davises voluntarily
rendered themselves unable to complete the conveyance on or
9
before the time fixed for closing; or (3) that the Davises
were able to complete the conveyance but neglected or
refused to so do. Although Henning/Cross argued that the
Davises had acted in bad faith, the commissioner concluded
otherwise and, accordingly, decided that Henning/Cross were
not entitled to damages based on the benefit of their
bargain.
After considering exceptions to the commissioner’s
supplemental report, the chancellor confirmed the report
and entered judgment against the Davises in favor of
Henning/Cross in the amount of $20,040.48. 5 We awarded
separate appeals to Shepherd and Henning/Cross but
consolidate them for purposes of this opinion. In the
Henning/Cross appeal, we also accepted assignments of
cross-error filed by the Davises.
II. ANALYSIS
A. STANDARD OF REVIEW
On appeal, we affirm a chancellor’s decree approving a
commissioner’s report unless the decree is plainly wrong or
without evidence to support it. Snyder Plaza Properties,
Inc. v. Adams Outdoor Advertising, Inc., 259 Va. 635, 641,
528 S.E.2d 452, 456 (2000); Lim v. Choi, 256 Va. 167, 171,
5
This sum included $5,761.48 for expenses and $14,279
for attorney and paralegal fees.
10
501 S.E.2d 141, 143 (1998). A chancellor should sustain a
commissioner’s factual findings if supported by the
evidence, but this principle does not apply to a
commissioner’s conclusions of law. Chesapeake Builders,
254 Va. at 299, 492 S.E.2d at 144. Similarly, we are not
bound by a chancellor’s interpretation of a contract
because we have the same opportunity as the chancellor to
consider the contract language. C.F. Garcia Enterprises,
Inc. v. Enterprise Ford Tractor, Inc., 253 Va. 104, 107,
480 S.E.2d 497, 498-99 (1997); Langman v. Alumni Ass’n of
the Univ. of Virginia, 247 Va. 491, 498, 442 S.E.2d 669,
674 (1994).
B. SHEPHERD APPEAL
The primary issue in Shepherd’s appeal concerns the
relationship between the provisions in the lease with the
Davises establishing Shepherd’s fixed-price option to
purchase the Property and his right of first refusal.
Shepherd argues, based on our decision in Cities Service
Oil Co. v. Estes, 208 Va. 44, 49, 155 S.E.2d 59, 63 (1967),
that a right of first refusal benefits a lessee and must,
therefore, be interpreted with that purpose in mind.
Interpreting the right of first refusal in that manner,
Shepherd contends that the parties’ reason for including
the dual option was to allow him to purchase the Property
11
pursuant to whichever provision was more favorable to him
at the time based on a comparison of the terms of his
fixed-price option with those presented in a third-party
offer. In Shepherd’s view, the fixed-price option set a
ceiling on the purchase price of the Property, and the
right of first refusal allowed him to buy the Property at a
lower figure by matching a third-party offer.
With regard to the prefatory language
“[n]otwithstanding anything contained in this Agreement to
the contrary,” Shepherd posits that this phrase means that,
notwithstanding the fact that he had a fixed-price option,
he also had the right to purchase the Property at the price
set forth in a bona fide third-party offer. The terms of
the dual option, says Shepherd, are not contradictory.
Instead, the two provisions are separate and distinct,
creating two ways in which he can elect to purchase the
Property. According to Shepherd, the fixed-price option
remains in effect throughout the term of the lease even if
he elects not to exercise his right of first refusal and
the Davises sell the Property to a third party.
We agree that generally a fixed-price option is
included in a lease to benefit the lessee, see id., but
that principle does not control our interpretation of the
provisions at issue. In Cities Service Oil, this Court
12
addressed a dual option in a lease, but the issue was
whether the right of first refusal contained in that
particular lease applied to a public judicial sale. Id. at
45, 155 S.E.2d at 60. We were not called upon in that
case, as we are here, to decide whether either provision
took precedence over the other.
There is a split in authority on this issue. Some
courts have held that a lessee may exercise a fixed-price
option without regard to a right of first refusal. See
e.g. Gulf Oil Corp. v. Chiodo, 804 F.2d 284, 286 (4th Cir.
1986); Amoco Oil Co. v. Snyder, 478 A.2d 795, 798-99 (Pa.
1984); Butler v. Richardson, 60 A.2d 718, 722 (R.I. 1948);
Crowley v. Patterson, 306 N.W.2d 871, 875 (S.D. 1981).
Other courts have concluded that a lessee forfeits the
right to purchase under a fixed-price option when the
lessee refuses to exercise a right of first refusal after
being presented with a third-party offer. See e.g. Shell
Oil Co. v. Blumberg, 154 F.2d 251, 252-53 (5th Cir. 1946);
Northwest Racing Ass’n v. Hunt, 156 N.E.2d 285, 288 (Ill.
App. Ct. 1959); Tarrant v. Self, 387 N.E.2d 1349, 1353
(Ind. Ct. App. 1979); M & M Oil Co. v. Finch, 640 P.2d 317,
320-21 (Kan. Ct. App. 1982). However, courts agree that
the interpretation of dual-option provisions turns upon the
particular language used and that a decision construing a
13
dual option in one agreement will not necessarily be
persuasive or controlling in a case involving a different
agreement. Chiodo, 804 F.2d at 286; Bobali Corp. v. Tamapa
Co., 340 A.2d 485, 490 (Pa. Super. Ct. 1975); Crowley, 306
N.W.2d at 873.
We find the terms of the dual-option provisions in
this case to be clear and unambiguous. Thus, we construe
those terms according to their plain meaning. Golding v.
Floyd, 261 Va. 190, 192, 539 S.E.2d 735, 736 (2001); Winn
v. Aleda Const. Co., 227 Va. 304, 307, 315 S.E.2d 193, 194-
95 (1984). In doing so, we do not treat any word or phrase
as meaningless if a reasonable meaning can be given to it.
Dominion Saving Bank, FSB v. Costello, 257 Va. 413, 417,
512 S.E.2d 564, 567 (1999); Winn, 227 Va. at 307, 315
S.E.2d at 194-95.
Applying these principles to the dual-option
provisions at issue, we are persuaded that the prefatory
language modifies the fixed-price option and gives the
right of first refusal precedence. The fixed-price option
is the only provision in the lease that, by its terms, is
“contrary” to Shepherd’s right of first refusal. We agree
with the Davises’ argument that “the use of the term
‘contrary’ suggests the terms being overridden are not
complementary.” The phrase “[n]otwithstanding anything
14
. . . to the contrary” means irrespective of the fixed-
price option. To read this phrase as Shepherd suggests
would render meaningless not only the prefatory language
but also two other sentences found in Paragraph 23.11,
which created the right of first refusal.
The first of those sentences provides that, if the
Davises receive a third-party offer to purchase the
Property (designated in the lease as the “Offer”), Shepherd
has the right to “exercise the Option to purchase the
Property [defined in the recital section of the lease as
Shepherd’s ‘option to purchase . . . Parcels 1 and 2’], or
such part of it described in the Offer, pursuant to the
terms and conditions contained in the Offer.” (Emphasis
added.) This sentence means that, when the Davises
communicated the Henning/Cross Offer to Shepherd, his
fixed-price option became subject to the terms of the
Offer, despite the fact that those terms were “contrary” to
the terms contained in the fixed-price option. Shepherd no
longer had the right to purchase the Property for the
amount established in the fixed-price option.
The second sentence is found at the conclusion of
Paragraph 23.11. That sentence provides that, if the
Davises do not sell the Property in accordance with the
Offer, Shepherd’s right of first refusal remains in effect.
15
Noticeably absent is any statement that, in those
circumstances, the fixed-price option to purchase also
remains in effect. Contrary to Shepherd’s argument, his
fixed-price option does not survive in that situation. 6
Thus, we conclude that, upon receipt of the
Henning/Cross Offer, Shepherd had the right to purchase the
Property but only pursuant to the terms and conditions of
the Offer. He no longer could purchase the Property under
the terms of his fixed-price option.
As an alternative argument, Shepherd contends that he
was not obliged to exercise the right of first refusal
because the Henning/Cross Offer was not “bona fide” as
required by the terms of Paragraph 23.11. He enumerates
two reasons for this contention: (1) the Offer “contained a
‘poison pill’ making it unreasonable for Shepherd to accept
it[,]”; and (2) the terms of the Offer “required far more
than the mere purchase of the [Property].” Both of these
reasons turn on the fact that the Henning/Cross Offer was
contingent upon vacation of the lot line between the
6
Our conclusion is not altered by Shepherd’s assertion
that a “Memorandum of Option” was recorded in the land
records for the City of Virginia Beach. See Code §§ 55-
57.1 and -57.2. Shepherd’s rights vis-à-vis the Davises
are determined by the lease agreement.
16
Property and the parcel of real estate owned by
Henning/Cross. 7
Shepherd asserts that this contingency was a “poison
pill” for him because, if he exercised the right of first
refusal, he would have to eliminate the lot line between
the Property and an adjacent parcel of real estate situated
to the north and owned by Lynnhaven Realty, L.L.C.
(Lynnhaven Realty). Although Shepherd acknowledged that he
owned Lynnhaven Realty, he, nevertheless, claimed that he
7
Henning testified before the commissioner that the
purpose of vacating the lot line was to unify the title
between the two parcels so that an easement for the benefit
of the Property across the Henning/Cross parcel could be
eliminated. That easement provided access to the Property
from Parker Lane, which in turn accessed Virginia Beach
Boulevard. Henning further agreed that vacating the lot
line and unifying the title would end the reason for the
then pending litigation involving the easement.
That easement has been the subject of ongoing
litigation between the same parties that are before us in
these two appeals. In Davis v. Henning, 250 Va. 271, 277,
462 S.E.2d 106, 109 (1995), we held that an easement by
necessity exists over the Henning/Cross property for the
benefit of the parcel referred to in this opinion as Parcel
1. Subsequently, when Henning/Cross allegedly blocked the
easement, Shepherd and the Davises each commenced suits
against Henning/Cross. According to the answer filed by
the Davises in the present suit, the purpose of their
agreement with Henning/Cross was to settle that second
round of litigation. After the execution of the agreement
between the Davises and Henning/Cross, the Circuit Court of
the City of Virginia Beach ruled that Henning/Cross could
not block the easement or interfere with either Shepherd’s
or the Davises’ use of it. This Court refused to award
Henning/Cross an appeal from that decree. Davis v.
Henning, No. 982364 (Feb. 18, 1999).
17
could not fulfill that requirement because two different
entities would own the parcels, unless he took title to the
Property in the name of Lynnhaven Realty, and vacating the
lot line would leave the Property landlocked. 8 Shepherd
also admitted that paying an additional $25,000 for the
Property was not acceptable to him.
We are not persuaded by Shepherd’s argument. The term
“bona fide” is defined as “[m]ade in good faith; without
fraud or deceit.” Black’s Law Dictionary 168 (7th ed.
1999). Like the commissioner, we find no evidence that the
Henning/Cross Offer was made for any improper purpose. The
fact that acceptance of the Offer would have resolved
pending litigation about the easement does not mean that it
was made in bad faith or was to perpetrate a fraud.
Shepherd suggests on brief that the terms of the Offer were
designed to make it unreasonable for him to purchase the
Property. However, neither his displeasure with those
terms nor the fact that they were more burdensome for
Shepherd than the terms of his fixed-price purchase option
changes our conclusion that the Henning/Cross Offer was
bona fide.
8
We note that Lynnhaven Realty did not acquire title
to its property until sometime between January and June
1998, when Shepherd deeded the property to it. During that
time frame, Henning/Cross offered to purchase the Property.
18
Thus, we hold that there is no error in the decree of
the chancellor confirming the commissioner’s findings that
the Henning/Cross Offer was bona fide and that Shepherd
forfeited his contractual rights to purchase the Property
by failing to exercise his right of first refusal upon
receipt of the Offer. Having forfeited those contractual
rights, Shepherd was not entitled to either specific
performance or damages. 9
C. HENNING/CROSS APPEAL
The assignments of error in the appeal awarded to
Henning/Cross can be narrowed to two questions: (1) whether
the chancellor erred by failing to award specific
performance to Henning/Cross; and (2) whether, having
denied specific performance, the chancellor erred by
awarding only “nominal” damages to Henning/Cross rather
than damages based on the “benefit of the bargain.” 10 We
will address the questions seriatim.
1. SPECIFIC PERFORMANCE
9
It is not necessary to address Shepherd’s remaining
assignments of error.
10
The Davises assert on brief that Henning/Cross
failed to assign error to the commissioner’s finding that
it was impossible for the Davises to convey fee simple
title to Parcel 1. That assertion is correct, but we still
must address whether the chancellor erred by refusing to
order an assignment of the Davises’ interests in Parcel 1.
19
Henning/Cross assert that they were entitled to
specific performance of their contract with the Davises
with an abatement of the purchase price. In particular,
they claim that they demanded and were willing to accept an
assignment of the Davises’ rights under their purchase
contract with Parker as to Parcel 1 and a deed from the
Davises conveying Parcel 2 to Henning/Cross, with an
appropriate abatement of the purchase price. At the
hearing before the commissioner, Henning confirmed that he
and Cross were still willing to accept an assignment of the
Davises’ contractual rights on the terms previously
outlined in a letter to the Davises’ attorney. In that
letter, Henning/Cross advised that they were ready,
willing, and able to close on the purchase of the Property,
and that, if necessary, they would “pay the full purchase
price less the provable assumption balance” and take an
assignment of the Davises’ contractual rights under their
agreement with Parker.
As Henning/Cross argue, we recognize, as a general
rule, that “when there is a deficiency in title, quantity,
or quality of an estate, the purchaser has the option to
require the seller to convey such part as the seller is
able, with an abatement of the purchase price for any
deficiency.” Chesapeake Builders, 254 Va. at 300-01, 492
20
S.E.2d at 145 (citing Turner v. Holloway, 146 Va. 827, 834,
132 S.E. 685, 687 (1926); Millman v. Swan, 141 Va. 312,
322, 127 S.E. 166, 169 (1925)); accord Firebaugh v.
Hanback, 247 Va. 519, 526, 443 S.E.2d 134, 137 (1994);
Hawks v. Sparks, 204 Va. 717, 720, 133 S.E.2d 536, 539
(1963). However, the rule is not absolute; we have
recognized exceptions. “[S]pecific performance of a
contract is not a matter of right, but rests in the
discretion of the trial court to be granted or refused
according to established principles and the facts of each
case.” Hawks, at 720, 133 S.E.2d at 539 (citing Raney v.
Barnes Lumber Corp., 195 Va. 956, 970, 81 S.E.2d 578, 586
(1954); Griscom v. Childress, 183 Va. 42, 47-48, 31 S.E.2d
309, 312 (1944); Darling v. Cumming’s Ex’or, 92 Va. 521,
525, 23 S.E. 880, 881 (1896)); accord Firebaugh, 247 Va. at
526, 443 S.E.2d at 137.
One such exception arises when a purchaser is not
asking for specific performance of a contract “ ‘as far as
the vendor is able.’ ” Reid v. Allen, 216 Va. 630, 633,
221 S.E.2d 166, 169 (1976) (quoting Robinson v. Shepherd,
137 Va. 687, 695, 120 S.E. 265, 267-68 (1923)). In Reid,
the purchasers sought to require a conveyance of a seller’s
undivided one-half interest in a certain tract of real
estate in exchange for payment of one-half of the contract
21
price with an abatement to be determined by the court. Id.
at 631, 221 S.E.2d at 168. We concluded that the
purchasers, “in effect, [sought] to convert an agreement to
sell the whole estate into one for a sale of one of the
undivided shares[,]” amounting to a “substitution of an
agreement which the parties had not contracted for.” Id.
at 633-34, 221 S.E.2d at 169. Thus, because the evidence
supported the commissioner’s finding that the parties never
intended to sell less than the whole estate, we denied
specific performance. Id.; see M’Cann v. Janes, 40 Va. (1
Rob.) 256, 261 (1842) (“plaintiff in a bill for specific
performance must not . . . call upon the other party to do
an act which he is not lawfully competent to do”).
As pointed out by the commissioner in the present
case, the purchase contract between the Davises and Parker
contains a provision explicitly prohibiting a conveyance or
assignment of the Davises’ interests in the contract and
the Property without Parker’s consent. There is no
evidence of such consent in this record. In fact, Michael
J. Parker, trustee of a testamentary trust established by
Parker, who was Michael’s father, testified before the
commissioner that, while the purchase contract with the
Davises could have been terminated or amended if all the
parties agreed, there had not been any such agreement.
22
Michael Parker also stated that no offer had been presented
to the Parker Estate “that would be a sufficient incentive”
to allow the Davises to prepay their obligation under the
purchase contract and “to tear up this contract and
11
substitute something else for it.”
Thus, Henning/Cross are not asking for specific
performance “as far as the [Davises] are able.” Reid, 216
Va. at 633, 221 S.E.2d at 169. The Davises cannot perform
as requested. An assignment of their interests in the
purchase contract with Parker would constitute a breach of
that contract. We agree with the commissioner; action
should not be ordered that would violate the contract.
We also agree with the commissioner’s finding that
specific performance should not be granted with regard to
only Parcel 2. Such relief would leave Parcel 2 landlocked
because the easement across the property of Henning/Cross
runs only to Parcel 1. Davis v. Henning, 250 Va. 271, 277,
462 S.E.2d 106, 109 (1995).
11
In a letter dated August 24, 1998, from an attorney
representing the Parker Estate to the Davises’ attorney,
the Parker Estate indicated that it “would, subject to
certain conditions and affirmations, permit an assignment
to Sans Souci with a full irrevocable payment and
performance guarantee by Mr. Shepherd.” However, when
Michael Parker testified, he stated that, in light of the
fact that a year and a half had passed since that letter
had been written, he did not presently have a position on
23
Given the facts of this case, we cannot say that the
chancellor abused his discretion by refusing to award
specific performance in favor of Henning/Cross with an
abatement of the purchase price. As we stated earlier, the
decision whether to award specific performance of a
contract rests in the sound discretion of a trial court; it
is not a matter of right. Hawks, 204 Va. at 720, 133
S.E.2d at 539.
2. DAMAGES
As an alternative argument, Henning/Cross assert that,
assuming specific performance was properly denied, they are
entitled to recover damages based on the loss of their
bargain. They ask this Court to reverse the chancellor’s
finding that they were entitled to only “restitutionary”
damages and to award them damages in the amount of $376,430
as recommended by the commissioner in his first report.
That figure was based on Henning’s valuation of the
Property. As an additional alternative position,
Henning/Cross claim that they should at least be awarded
loss-of-bargain damages in the amount of $315,000 based on
expert appraisal testimony at the second hearing before the
commissioner.
whether Shepherd’s guarantee would constitute adequate
financial capability.
24
“The general rule in Virginia is that the measure of
damages for failure of the vendor to convey as agreed is
the purchase price, or any part thereof, paid by the
vendee, with interest from date of payment.” Williams v.
Snider, 190 Va. 226, 228, 56 S.E.2d 63, 64 (1949); accord
Chesapeake Builders, 254 Va. at 299-300, 492 S.E.2d at 145;
Davis v. Beury, 134 Va. at 339, 114 S.E. at 777. However,
a purchaser of real estate may recover damages beyond the
return of the purchase price with interest, i.e. damages
for loss of the bargain, if the purchaser proves that the
seller
either acted in bad faith in originally undertaking to
convey such title [as was contracted to be conveyed],
or that, since the undertaking and on or before the
time fixed for the completion of the contract, he has
voluntarily disabled himself from making the
conveyance, or that he was able at such time to make
the conveyance contracted for and willfully neglected
or refused to do so.
Davis v. Beury, 134 Va. at 339, 114 S.E. at 777; accord
Chesapeake Builders, 254 Va. at 299-300, 492 S.E.2d at 145.
In this case, it is not necessary to decide which
category of damages Henning/Cross were entitled to recover
because either of the amounts they claimed as damages for
the loss of their bargain was too speculative in nature to
be sustainable. The calculation of both figures was
premised on the assumption that the Property could be
25
resold to a large, well-known, home and building supply
retailer. Henning testified at the first commissioner’s
hearing that he valued the Property at $8.25 per square
foot because that was the price at which Henning/Cross had
contracted to sell their adjoining property to this
retailer. Henning believed that he could sell the Property
to the same purchaser for the same price.
Similarly, at the second hearing, a commercial real
estate appraiser opined that, during the time frame of
October through December 1999, the Property was worth $9
per square foot “as a part of the adjoining properties.”
His valuation was premised on the Property being included
in the assemblage of surrounding parcels by a developer on
behalf of the same retailer and on the contract purchase
prices for those adjoining parcels.
The commissioner also received deposition testimony
from the real estate developer who, on behalf of that
retailer, had negotiated purchase contracts for the parcels
adjacent to the Property. While assembling those parcels
and negotiating the purchase contracts, the developer had
become familiar with the Property. He testified that he
would have been willing to purchase the Property for $9 per
square foot if “clear title” could have been conveyed.
However, he acknowledged that any such contract to purchase
26
the Property would have contained the same contingencies as
were included in the contracts to purchase the surrounding
parcels, including contingencies regarding rezoning.
As the plaintiffs in this suit, Henning/Cross had the
“burden of proving with reasonable certainty the amount of
damages and the cause from which they resulted; speculation
and conjecture cannot form the basis of the recovery.”
Carr v. Citizens Bank & Trust Co., 228 Va. 644, 652, 325
S.E.2d 86, 90 (1985) (citing Hale v. Fawcett, 214 Va. 583,
585, 202 S.E.2d 923, 925 (1974); Barnes v. Quarries, Inc.,
204 Va. 414, 418, 132 S.E.2d 395, 397-98 (1963)). Damages
based on uncertainties, contingencies, or speculation
cannot be recovered. Barnes, 204 Va. at 418, 132 S.E.2d at
397-98.
As argued by the Davises both before the commissioner
and this Court, the damages claimed by Henning/Cross fail
under this rule. All the evidence regarding the value of
the Property was speculative because the valuations hinged
on the assumption that the Property could be sold to a
large home and building supply retailer. Even the
developer admitted that, as of October 1999, the date upon
which damages were to be computed, the rezoning contingency
had not been fulfilled for any of the parcels under
27
contract. 12 Thus, the chancellor did not err in awarding
only nominal damages to Henning/Cross, which were
restitutionary in nature and included attorney fees. See
Kessler v. Commonwealth Doctors Hospital, Inc., 212 Va.
497, 504, 185 S.E.2d 43, 47 (1971) (judgment affirmed on
appeal when chancellor assigned the wrong reason for a
ruling but reached the correct result).
D. ASSIGNMENTS OF CROSS-ERROR
The Davises assign cross-error to the chancellor’s
award of attorney fees to Henning/Cross and to the
chancellor’s refusal to consider their “Special Exception”
to the commissioner’s supplemental report. In that
“Special Exception,” the Davises objected to the
commissioner’s finding that Henning/Cross were entitled to
an award of attorney fees. They also sought to amend their
answer to allege the defense of “unclean hands” in response
to the claim for attorney fees by Henning/Cross.
The chancellor, in his letter opinion, refused to
consider the “Special Exception” because it was not timely
filed. We find no abuse of discretion in that ruling. The
commissioner filed his supplemental report on January 12,
12
When the chancellor re-referred the damage issue to
the commissioner, he directed that damages be calculated as
of October 1999. No party assigned error challenging the
validity of that date.
28
2001. However, the Davises did not file the “Special
Exception” until May 7, 2001. Their exception to the
commissioner’s supplemental report was not timely under the
provisions of Code § 8.01-615.
III. CONCLUSION
For the reasons stated, we will affirm the
chancellor’s final decree in both suits. However, we will
remand the Henning/Cross appeal for further proceedings to
adjudicate their claim for additional attorney fees and
costs incurred in the appeal.
Record No. 020188 – Affirmed.
Record No. 020189 – Affirmed and remanded.
29