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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