Stuarts Draft Shopping Center, L.P. v. S-D Associates

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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