Denton v. Browntown Valley Assocs. , 803 S.E.2d 490 ( 2017 )

PRESENT: All the Justices
JAMES T. DENTON
OPINION BY
v. Record No. 160999 JUSTICE WILLIAM C. MIMS
August 31, 2017
BROWNTOWN VALLEY ASSOCIATES, INC.
FROM THE CIRCUIT COURT OF WARREN COUNTY
Dennis L. Hupp, Judge
In this appeal, we consider whether the circuit court abused its discretion by denying a
seller specific performance of a contract for the sale of real property. We also consider whether
the court abused its discretion when it determined the amount of attorney’s fees to award to the
prevailing party under the contract’s fee-shifting provision.
I. BACKGROUND AND MATERIAL PROCEEDINGS BELOW
James T. Denton owns a 122.281-acre parcel of real property (“the Property”) in Warren
County. In June 2005, Browntown Valley Associates, Inc. (“BVA”) contracted to buy the
Property from Denton for $740,500, including a $500 purchase money deposit that it placed in
escrow with its purchasing agent. The contract provided that the sale would be settled the
following month. By a series of amendments, the settlement date was postponed to October
2005. The contract also provided for an award of costs and reasonable attorney’s fees to the
prevailing party in any action arising out of it.
BVA was unwilling to settle on the amended settlement date. In December 2005, it
notified Denton’s listing agent that it was “going to have to drop the contract” because it was
unable to reach an agreement with the owner of an adjacent parcel about improvements to a
right-of-way. BVA’s purchasing agent offered Denton a release agreement terminating the
contract and authorizing the return of the deposit to BVA. Denton’s listing agent countered by
offering him a release agreement terminating the contract and authorizing payment of the deposit
to Denton. Denton did not sign either release agreement. 1
A month later, Denton’s listing agent sent him an email urging him to sign her proposed
release agreement. He refused, responding that he had “no intention of releasing [BVA] from
this contract.” He wrote that he had accepted BVA’s offer instead of competing offers because it
alone had included no contingencies for settlement. He felt that BVA’s $500 purchase money
deposit on a $740,500 contract indicated that it had made the offer in bad faith, intending to
minimize its losses if it later abandoned the purchase for reasons not included as a contingency in
the contract. He felt that the contract was enforceable and he intended to enforce it unless he
received a better offer from another prospective purchaser.
Denton continued to list the Property for sale intermittently through November 2010 but
he did not receive any offers. In April 2011, he filed an amended complaint in the circuit court
alleging that BVA had breached the contract, asserting that he was ready and willing to perform,
and seeking specific performance by BVA. He also sought an award of costs and attorney’s fees.
He tendered a deed conveying the Property to BVA.
BVA filed an answer and grounds of defense alleging, among other things, that the
contract required Denton to convey marketable title. However, it alleged, his immediate
predecessors-in-title claimed a 4.191-acre tract (“the Tract”) of the Property by adverse
possession, but that neither they nor Denton had obtained a decree quieting title. Thus, BVA
continued, Denton was unable to perform the contract because his title in the Tract was not clear
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BVA’s purchasing agent nevertheless returned the deposit to BVA.
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and thus he could not convey marketable title in the Property as a whole. BVA also
counterclaimed for costs and attorney’s fees. 2
Denton asserted that he had resolved any dispute over ownership of the Tract in a deed
dated March 19, 1993, between him and Wayside Inn Limited Partnership (“Wayside”), the
owner of an adjacent parcel. The deed purported to settle the boundary between the parcels and
each party relinquished any claim to the parcel lying on the opposite side of the boundary.
Denton asserted that Wayside thereby relinquished any claim to the Tract, so his title in the
Property therefore was clear and marketable.
To rebut Denton’s assertion regarding the boundary settlement deed, BVA sought to
admit a substitute trustee’s deed dated March 4, 1994 and recorded April 22, 1994, conveying
Wayside’s parcel to NationsBank of Maryland, N.A. (“NationsBank”) following a foreclosure
sale of the parcel. BVA noted that although Denton’s deed with Wayside was dated March 19,
1993, it was not recorded until December 1994, after the March 1994 substitute trustee’s deed
was recorded. BVA argued that the boundary settlement deed was not in Wayside’s chain of
title when NationsBank acquired its parcel, so that deed did not resolve the dispute over
ownership of the Tract. Denton filed a motion in limine seeking to exclude the substitute
trustee’s deed. The circuit court denied the motion, and the case proceeded to a bench trial.
At the conclusion of Denton’s case, BVA moved to strike the evidence. The circuit court
deferred its ruling on the motion until BVA presented its case. After all the evidence was heard,
the court further deferred its ruling and heard closing argument. It subsequently entered an order
2
BVA also filed a third-party complaint against its purchasing agent, alleging that by
returning the $500 deposit to BVA, the agent had induced it to believe that Denton had accepted
the release agreement. The agent filed a demurrer, which the circuit court sustained. These
pleadings and the associated proceedings are relevant only as they pertain to BVA’s
counterclaim for attorney’s fees from Denton.
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in which it granted the motion, awarded judgment to BVA, and dismissed Denton’s amended
complaint with prejudice.
Denton filed a motion to reconsider. The circuit court responded with a letter opinion
ruling that the motion would be denied. 3
The circuit court thereafter held a hearing on BVA’s counterclaim for an award of costs
and attorney’s fees. BVA sought an award of $98,673.15 in attorney’s fees, plus expert witness
fees and costs. After receiving evidence and hearing the testimony of competing expert
witnesses called by each party, the court entered a final order awarding BVA $47,800 in
attorney’s fees, plus expert witness fees and costs.
We awarded Denton this appeal.
II. ANALYSIS
Specific performance is an equitable remedy. A suit in equity for specific performance is
distinct from an action at law for breach of contract. There is no right to specific performance
that a court is obligated to enforce. Cox v. Cox, 67 Va. (26 Gratt.) 305, 308 (1875); see also 1
William Minor Lile, Notes of Lectures on Equity Jurisprudence 224 (1921) (“The most striking
feature of the remedy of specific performance is, that it is not regarded as a strict right which the
court is bound to enforce, but as an extraordinary act of grace on the part of the court, to be
granted only where the plaintiff makes out his case fully.” (emphasis in original)). He who seeks
specific performance bears the burden of proving both that there is a definite contract and that he
has performed all that is required of him (or that he is ready and willing to perform at the time of
his suit), and that all conditions precedent have been fulfilled. Cox, 67 Va. (26 Gratt.) at 308.
3
The record includes no order memorializing this ruling, but the letter is sufficient to
show that the circuit court considered the motion, thereby preserving the arguments Denton
made in it. Cf. Brandon v. Cox, 284 Va. 251, 256, 736 S.E.2d 695, 697 (2012).
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Even if all the required proofs are made, the court in equity is not required to grant the relief
sought. Id. Accordingly, the circuit court’s judgment denying specific performance is reviewed
for abuse of discretion.
The three principal ways in which a court abuses its discretion are when it fails to
consider a relevant factor entitled to significant weight, when it gives significant weight to an
improper or irrelevant factor, or when it properly weighs the proper factors but makes a clear
error of judgment. Landrum v. Chippenham & Johnston-Willis Hosps., Inc., 282 Va. 346, 352,
717 S.E.2d 134, 137 (2011).
A. MOTION IN LIMINE
In his third assignment of error, Denton asserts that the circuit court erred by denying his
motion in limine and admitting the substitute trustee’s deed. He argues that none of Wayside’s
successors-in-title have contested his boundary settlement deed or asserted any claim to the Tract
since he and Wayside executed that deed. Consequently, “dealings with the property since [the
substitute trustee’s deed] was made have been inconsistent with” BVA’s assertion that the
boundary settlement deed was inadequate to resolve any dispute over ownership of the Tract, so
the “documents affecting an interest in property” exception to the hearsay rule in Rule 2:803(15)
did not apply. He argues that the substitute trustee’s deed was not in Denton’s chain of title, he
had no knowledge of its contents or their veracity, and he could not question any of the parties to
it. He also argues that the deed was irrelevant to establish the current ownership of the Tract.
Denton first made the hearsay argument to the circuit court in his motion to reconsider.
As noted above, the court’s letter ruling that the motion would be denied is sufficient to preserve
the arguments he made in it for appeal. Cf. Brandon, 284 Va. at 256, 736 S.E.2d at 697.
However, the court also ruled that the exhibits he attached to the motion to show that Wayside’s
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successors-in-title had accepted the boundary lines that he and Wayside agreed to in their mutual
deed were inadmissible because they were not timely introduced at trial. Denton has not
assigned error to this evidentiary ruling, so we will not consider the exhibits as evidence
supporting his argument that the conduct of Wayside’s successors-in-title after the boundary
settlement deed are inconsistent with BVA’s argument. Accordingly, he has failed to establish
that the Rule 2:803(15) exception does not apply and that the substitute trustee’s deed should not
have been admitted.
Regarding Denton’s relevance argument, Rule 2:401 defines relevant evidence as
“evidence having any tendency to make the existence of a fact that is of consequence to the
determination of the action more probable or less probable than it would be without the
evidence.” The validity of the boundary settlement deed to settle the dispute over ownership of
the Tract was “a fact . . . of consequence” in the action because Paragraph 19 of the contract
required Denton to convey “good and marketable [title,] insurable by a licensed title company
with no[] additional risk premium.”
Marketable title is title
which is free from liens or encumbrances; one which discloses no serious defects
and is dependent for its validity upon no doubtful questions of law or fact; one
which will not expose the purchaser to the hazard of litigation or embarrass him in
the peaceable enjoyment of the land; one which a reasonably well-informed and
prudent person, acting upon business principles and with full knowledge of the
facts and their legal significance, would be willing to accept, with the assurance
that he, in turn, could sell or mortgage the property at its fair value.
Haisfield v. Lape, 264 Va. 632, 637, 570 S.E.2d 794, 796 (2002) (quoting Madbeth, Inc. v.
Weade, 204 Va. 199, 202, 129 S.E.2d 667, 669-70 (1963)). When challenged, the seller bears
the burden of proving that his title is marketable. Lyle v. Andrews, 217 Va. 192, 194, 227 S.E.2d
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686, 688 (1976) (citing Madbeth, 204 Va. at 203, 129 S.E.2d at 670); see also Improved Realty
Corp. v. Sowers, 195 Va. 317, 320, 78 S.E.2d 588, 590 (1953).
The circuit court inferred from the fact that Wayside’s parcel had been subject to a deed
of trust that the consent of the trustee or beneficiary was required before Wayside could
relinquish any interest it may have had in the Tract, but there was no evidence that any such
consent had been given. Consequently, the substitute trustee’s deed made the validity of the
boundary settlement deed “less probable,” so the deed was relevant and admissible.
We find no flaw in this reasoning. Accordingly, we will not reverse the circuit court’s
denial of Denton’s motion in limine as an abuse of discretion.
B. MOTION TO STRIKE
In five assignments of error, Denton asserts that the circuit court erred by granting BVA’s
motion to strike. In his first assignment of error, he asserts that the court erred because it relied
on the substitute trustee’s deed, which he again argues was improperly admitted. Having
concluded that the court did not abuse its discretion by admitting that deed, we need not consider
this argument further.
In his second assignment of error, Denton asserts that the circuit court erred because the
contract required BVA to conduct a title examination prior to settlement and that, if BVA had
fulfilled this contractual obligation, it could have raised any alleged defect in his title in the Tract
in time for him to cure it. In his fourth assignment of error, he similarly asserts that because
BVA did not conduct a title examination and adduced no evidence from a title examiner or title
insurance company either that there was a genuine dispute over the ownership of the Tract or that
any such dispute would make Denton’s title in the Property unmarketable, BVA has not shown
that he is not willing and able to perform.
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We disagree with all of these arguments. Regardless of the contract’s requirement for a
title examination, it is the seller who bears the burden of proving that he has marketable title.
Lyle v. Andrews, 217 Va. at 194, 227 S.E.2d at 688. That is doubly true where the seller seeks
specific performance of the contract. Cox, 67 Va. (26 Gratt.) at 308.
The burden of proof encompasses “two related but distinct concepts: (1) [t]he ‘burden of
production,’ which is the obligation to come forward with evidence to make a prima facie case,
and (2) the ‘burden of persuasion,’ which is the obligation to introduce evidence that actually
persuades the fact finder to the requisite degree of belief that a particular proposition of fact is
true.” SunTrust Bank v. PS Bus. Parks, L.P., 292 Va. 644, 652, 791 S.E.2d 571, 575 (2016).
“Although the burden of production frequently passes between the parties, the burden of
persuasion as to an element of the plaintiff's claim never shifts.” Id. at 653-54, 791 S.E.2d at
575-76 (internal quotation marks omitted).
Denton’s boundary settlement deed initially met his burden of production as prima facie
evidence that any dispute over ownership of the Tract had been resolved (and, consequently, that
his title was marketable), thereby shifting the burden of production to BVA to rebut that
evidence. However, BVA’s introduction of the substitute trustee’s deed did rebut Denton’s
boundary settlement deed by calling into question Wayside’s authority to relinquish any interest
in the Tract, thereby shifting the burden of production back to him. He might have met this
burden by, for example, impeaching the substitute trustee’s deed, or by adducing evidence that
the trustee or beneficiary of Wayside’s deed of trust had consented to the boundary settlement
deed or that no such consent was required under that deed of trust. Denton did nothing. He
therefore ultimately failed to meet his burden of persuasion that he held marketable title.
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In his fifth assignment of error, Denton asserts that the circuit court erred because any
dispute over ownership of the Tract is immaterial to the sale of the Property as a whole. He
argues that in Jackson v. Ligon, 30 Va. (3 Leigh) 161, 179-80 (1831) (opinion of Carr, J.), we
held that a “trifling” dispute over “a few acres in a tract of land” does not render title in the
whole tract unmarketable. Rather, the parties could be ordered to perform and the seller to
compensate for the uncertainty in his title. The 4.191-acre Tract is a negligible fraction of the
overall 122.281-acre Property, he continues, so the court should have ordered that remedy in this
case.
The circuit court noted that Denton had adduced as evidence a letter from BVA’s
purchasing agent to him stating that BVA sought to develop a riverfront subdivision. It also
noted that Denton’s plat showed that the Tract included 200 feet of riverfront property on the
Shenandoah River. Finally, it also noted that in Jackson, we ruled that performance and
compensation could be ordered where the disputed acres “possess[] no particular value in
relation to the general tract.” Id. It then ruled that the holding in Jackson did not apply to the
facts of this case because the cloud on Denton’s title in the Tract was not a trifling dispute, the
Tract was a significant part of the Property in light of BVA’s development intentions, and
Denton had not even offered compensation for the uncertainty in his title.
We agree with the circuit court. Justice Carr’s seriatim opinion identifies two factors for
courts to consider when weighing whether to order performance and compensation: (1) the
magnitude of the deficiency in title, and (2) the value of the area in dispute in relation to the
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whole property to be conveyed. Id. The circuit court did not abuse its discretion; it correctly
identified the relevant factors and properly weighed them. 4
C. ATTORNEY’S FEES
In three assignments of error, Denton asserts that the circuit court abused its discretion by
awarding BVA attorney’s fees. In his seventh assignment of error, he asserts that the court erred
under the first breach doctrine by awarding attorney’s fees at all. He argues that BVA breached
the contract first, so it cannot invoke the fee-shifting provision. The court disregarded this
argument because he did not plead it as an affirmative defense to BVA’s counterclaim for costs
and attorney’s fees. He contends that the court erred by doing so because the purpose of the
pleading requirement is to avoid prejudice, but BVA could not be prejudiced by his assertion that
it breached the contract since that was the basis for his underlying claim for specific
performance.
The first party to materially breach a contract cannot enforce it. Countryside
Orthopaedics, P.C. v. Peyton, 261 Va. 142, 154, 541 S.E.2d 279, 285 (2001). The first breach
doctrine is an affirmative defense. See Norfolk S. Ry. Co. v. E. A. Breeden, Inc., 287 Va. 456,
461-62, 756 S.E.2d 420, 423 (2014). As a general rule, affirmative defenses must be pled to be
relied on at trial. Monahan v. Obici Med. Mgmt. Servs., 271 Va. 621, 632, 628 S.E.2d 330, 336
(2006). However, there are three exceptions to the general rule: “(1) where the issue addressed
by the affirmative defense was not disclosed in the plaintiff's pleading; (2) where the affirmative
4
In his sixth assignment of error, Denton asserts that the circuit court erred because it
should have extended Peers v. Barnett, 53 Va. (12 Gratt.) 410 (1855) to relieve a seller from the
burden of litigating a quiet title claim when he has had uninterrupted possession of the real
property for fifteen years and his claim to it has never been challenged. However, Denton has
not indicated where in the record he asked the court to do so, either in his petition for appeal or
his opening brief. Rules 5:17(c)(1) and 5:27(c). We have not found any place where he did.
Accordingly, this argument has not been preserved for appeal. Rule 5:25.
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defense is not an absolute bar to recovery; and (3) where the affirmative defense is addressed by
statute.” New Dimensions, Inc. v. Tarquini, 286 Va. 28, 36, 743 S.E.2d 267, 271 (2013) (internal
quotation marks omitted). None of these exceptions apply here, so Denton’s failure to plead the
first breach doctrine prevented him from raising it at trial.
In his eighth assignment of error, Denton asserts that the circuit court erred by awarding
BVA $47,800 in attorney’s fees because its attorney’s fees affidavit failed to adequately describe
the work performed and included charges incurred in relation to BVA’s third-party complaint
against its purchasing agent. Consequently, he argues, the court’s award is inconsistent with the
factors we articulated in Chawla v. BurgerBusters, Inc., 255 Va. 616, 623, 499 S.E.2d 829, 833
(1998).
We disagree. As we recently reiterated, in Chawla we identified seven non-exclusive
factors for courts to consider when weighing the reasonableness of an award of attorney’s fees:
“(1) the time and effort expended by the attorney, (2) the nature of the services rendered, (3) the
complexity of the services, (4) the value of the services to the client, (5) the results obtained, (6)
whether the fees incurred were consistent with those generally charged for similar services, and
(7) whether the services were necessary and appropriate.” Lambert v. Sea Oats Condo. Ass’n,
Inc., 293 Va. 245, 254, 798 S.E.2d 177, 183 (2017) (internal alterations omitted). In its letter
opinion incorporated into its final order, the circuit court expressly referred to each of these
factors. Further, the record reflects that the court received evidence and expert opinion
testimony to support each of them.
John Foote, BVA’s expert witness, testified that he had practiced law for forty-two years,
the most recent seventeen years as a partner in a firm specializing in real property. He testified
that he had tried five specific performance cases. He testified that BVA’s attorneys’ individual
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rates were reasonable for the geographical area in light of their experience and qualifications.
When assessing the reasonableness of the hours billed, he testified that he considered the
duration of the litigation, the capabilities of the attorneys, the contentiousness of the proceedings,
and the vigor of each party’s responses to the other’s arguments. He testified that he had
examined every billing entry in BVA’s affidavit and invoices. He testified that in his opinion,
taken in context, each entry adequately described the related work performed. He testified that
there was no unreasonable duplication. He testified that in light of the quality of representation
on both sides, the complexity of the issues, and the amount of money at stake if BVA was
ordered to purchase the Property, the attorney’s fees BVA had incurred were reasonable. When
questioned specifically about the inclusion of attorney’s fees incurred in relation to BVA’s third-
party complaint, he testified that he compiled a spreadsheet from the affidavits and invoices and
confirmed that those fees were excluded from BVA’s request.
Nevertheless, the circuit court ruled that
[t]he failure of [BVA] to have [the] title examined as called for under the contract
. . . is a legitimate and greatly significant consideration in my determination of the
amount of the award. This, in my view, is one of the ‘attending circumstances’ as
discussed in Mullins v. Richlands Nat’l Bank, [241 Va. 447, 449, 403 S.E.2d 334,
335 (1991)]. If a title examination had been performed at the outset, it is very
possible, if not likely, that [BVA] would have discovered the title defect upon
which this case ultimately turned . . . . This litigation may well have been avoided
or greatly narrowed in scope. [BVA] must bear to some significant extent the
consequences of its neglect in this regard.
It therefore reduced the award from the $98,673.15 BVA sought to only $47,800.
Accordingly, contrary to Denton’s argument, the circuit court correctly identified the
appropriate factors to determine the reasonableness of an award of attorney’s fees and properly
weighed them in light of the evidence and testimony adduced by the parties.
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In Denton’s final assignment of error, he asserts that the circuit court erred by awarding
BVA the attorney’s fees that it incurred while countering his objections to its award of attorney’s
fees on the merits of his specific performance claim. He argues that he had reasonable
challenges to BVA’s evidence and the amount of the award of attorney’s fees it sought, so the
attorney’s fees BVA incurred while proving the reasonableness of the award should not have
been included in it.
We disagree. Denton has conflated the standard for awarding attorney’s fees as a form of
sanctions under Code § 8.01-271.1 (which requires parties to make arguments “well grounded in
fact,” “warranted by existing law or a good faith argument for an extension, modification, or
reversal of existing law,” and “not interposed for any improper purpose”) with the standard
applicable for an award of attorney’s fees under a contractual fee-shifting provision. In the
latter, the award is not dependent on the opposing party’s bad faith or lack of evidence. To the
contrary, each party may genuinely believe in the legitimacy of its claims; “[n]either’s position
need be frivolous.” Lambert, 293 Va. at 258, 798 S.E.2d at 185.
In a case where the prevailing party is entitled to an award of attorney’s fees, the
reasonableness of the award it seeks becomes an issue to be adjudicated in the case. See Lee v.
Mulford, 269 Va. 562, 566, 611 S.E.2d 349, 351 (2005) (noting that where a plaintiff sought a
jury trial in a breach of contract action and failed to request bifurcation of the issue of attorney’s
fees to be awarded under the contract, that issue too was committed to the jury for a decision).
The attorney’s fees that the prevailing party incurs while litigating the issue of attorney’s fees are
no different from those it incurs while litigating any other issue on which it prevails.
Accordingly, this Court regularly permits awards of reasonable attorney’s fees incurred by
prevailing parties on appeal, even on the issue of whether the lower court’s award of attorney’s
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fees was reasonable, when such relief is sought. See, e.g., Lambert, 293 Va. at 259, 798 S.E.2d
at 186-87 (remanding for an award of reasonable attorney’s fees incurred during appeal);
Dewberry & Davis, Inc. v. C3NS, Inc., 284 Va. 485, 500, 732 S.E.2d 239, 246 (2012) (same);
Manchester Oaks Homeowners Ass'n v. Batt, 284 Va. 409, 431, 732 S.E.2d 690, 703 (2012)
(same).
The circuit court therefore did not abuse its discretion by including in its award the
attorney’s fees BVA incurred while litigating the reasonableness of the award it sought, and we
will not reverse its ruling.
III. CONCLUSION
For the reasons set forth above, we will affirm the judgment of the circuit court. We will,
however, remand the case for an award of the costs and reasonable attorney’s fees BVA incurred
in this appeal.
Affirmed and remanded.
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