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HORTON v. HORTON (59881)


HORTON v. HORTON


June 6, 1997
Record No. 961176

ANNA LEE HORTON

v.

HOWARD P. HORTON

OPINION BY JUSTICE BARBARA MILANO KEENAN
FROM THE CIRCUIT COURT OF CLARKE COUNTY

James L. Berry, Judge
Present: All the Justices


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 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
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
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 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 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 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.[1] 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 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. Hortons 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
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.

 

 

FOOTNOTES:

[1] 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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