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LANSDOWNE DEV. CO. v. XEROX REALTY CORP, et al.


LANSDOWNE DEV. CO.

v.

XEROX REALTY CORP, et al.


February 26, 1999
Record No. 981043

LANSDOWNE DEVELOPMENT COMPANY, L.L.C.

v.

XEROX REALTY CORPORATION, ET AL.

FROM THE CIRCUIT COURT OF LOUDOUN COUNTY
Thomas D. Horne, Judge
Present: All the Justices
OPINION BY JUSTICE LAWRENCE L. KOONTZ, JR.


In this appeal, we consider whether the
contract between the parties to a real estate transaction
required the purchaser to provide a deed of trust to the seller
to secure the purchaser’s performance of rezoning proffers
made by the seller to the local government, where the contract
required the purchaser to assume the seller’s liability for
the proffers.

BACKGROUND

Although the record in this complex land
development case is quite extensive, we recount only those facts
relevant to our resolution of the appeal. Xerox Realty
Corporation (Xerox Realty), a wholly owned subsidiary of Xerox
Corporation, is the owner of approximately 1,350 acres of
undeveloped land in Loudoun County (the property). Xerox Realty
also owns an adjacent developed parcel leased to another Xerox
subsidiary, the Xerox Document University (the XDU parcel). Xerox
Realty had planned to use the undeveloped property for expansion
and mixed commercial and residential development. However, due to
changes in market conditions, Xerox Realty determined that
commercial development of the property was not feasible and began
exploring the possibility of selling the property to a developer
for use exclusively as a residential development. This change in
the development concept required rezoning of the property.

At the time the decision to change the
development concept was made, Xerox Realty had already made
various proffers to Loudoun County concerning the development of
the property and had entered into contracts and conservancy
documents relevant to the use of both the property and the XDU
parcel. In the summer of 1993, Xerox Realty entered into
negotiations with Lansdowne Development Company, L.L.C.
(Lansdowne)
[2] for the sale of the property. The completion of the
sale was conditioned upon the successful rezoning of the property
for residential development, and Xerox Realty was to "take
the lead on the rezoning effort with the cooperation and input of
[Lansdowne]." During the negotiations and in the final
contract, the parties referred to the development plan for the
property, including the existing and anticipated proffer
obligations, as "the Project."

During the negotiations between Xerox Realty
and Lansdowne, Xerox Realty estimated the total value of the
project prior to development at 40 million dollars, of which
approximately 18.5 million dollars represented Xerox
Realty’s obligation to complete the proffers it had
previously made or would make to secure the necessary rezoning.
In a letter of intent dated September 30, 1993, Lansdowne agreed
to a cash purchase price of 21.5 million dollars and the
assumption "of [Xerox Realty’s] liabilities and
obligations with respect to the Project (including, without
limitation, those arising under contracts, proffers, bonds,
conservancy documents and other matters related to the
[property]) and [to] secure a release of [Xerox Realty] therefrom, if possible." Lansdowne’s letter of intent
further specified that Lansdowne’s "agreement to
perform such proffer obligations will be secured by [a] Deed of
Trust . . . and by a reserve account."

In the final contract, dated December 30, 1993,
between Xerox Realty and Lansdowne, these aspects of the
negotiations regarding the purchase price of the property and the
assumption of liability for the rezoning proffers were
memorialized in the following terms:

Purchaser shall assume the Liabilities
and, to the extent Seller has not been released from the
Liabilities, shall pay, honor and discharge such
Liabilities when due and payable or otherwise required to
be performed under the relevant agreements and
instruments. . . .

[A]t Closing Purchaser shall assume all
proffer obligations with respect to the Project provided
for in the Development Concept Plan . . .
("Proffer Obligations"). All such Proffer
Obligations shall be performed by Purchaser as and when
required under the Development Concept Plan. Proffer
Obligations that require expenditures of sums of money in
connection with their performance . . . are
referred to herein as "Monetary Proffers."
Purchaser’s obligations hereunder to perform the
Monetary Proffers shall be secured by the Purchase Money
Trust (as hereinafter defined). The amount to be secured
shall be determined prior to Closing by christopher
consultants or by another engineer mutually acceptable to
the parties. . . .

If Purchaser fails to timely perform
its Proffer Obligations . . . and if Loudoun
County requires Seller to perform such Proffer
Obligations or if the failure to perform such Proffer
Obligations has a material adverse effect on the use and
operation of the XDU Parcel, . . . then Seller
shall have the right, but not the obligation
. . . to enter upon the Land . . . to
perform such unperformed Proffer Obligations as may be
deemed necessary by Seller in its sole discretion.

The Purchase Money Trust as defined in the
contract included a purchase money note "secured by a first
lien deed of trust . . . on the Project." Relevant
to this appeal, the contract also provided that in the event of
litigation arising from the contract, "any judgment awarded
to the prevailing party shall include all litigation expenses,
including actual attorney’s fees, which shall not be
unreasonable, and court costs."

In order to obtain the rezoning required by the
contract, Xerox Realty as owner of the property and the XDU
parcel, along with other adjoining landowners and Lansdowne, made
further rezoning proffers to Loudoun County in an amendment to
the original development plan dated May 24, 1995. Loudoun County
accepted the amended development plan, which required the parties
to put into effect certain escrow arrangements and trust funds to
assure adequate funding of construction and improvements related
to the proffers.

Pursuant to the terms of the contract,
christopher consultants
[2] was to develop "an estimate for the proffer
commitments made with the recently approved Rezoning and Concept
Plan Amendment for Lansdowne." On September 7, 1995,
christopher consultants provided Xerox Realty with a preliminary
estimate of the construction cost of the proffers, placing that
cost in excess of 18 million dollars. Xerox Realty forwarded this
estimate to Lansdowne on September 26, 1995, indicating that
Xerox Realty intended to use the estimate "in computing the
final amount of the [Lansdowne] Deed of Trust" at the
closing.

Prior to closing, Lansdowne arranged to sell
two sections of the property. Lansdowne requested that Xerox
Realty release these sections from the deed of trust at closing.
Xerox Realty refused this request, noting that the contract had
specific terms for release of portions of the property, and that
these requirements would not be met under Lansdowne’s
proposal.

After first obtaining an attorney’s
opinion letter indicating that Xerox Realty could not "be
required to perform obligations under the Monetary
Proffers," Lansdowne prepared a memorandum for christopher
consultants requesting that it "determine the amount of
security [Lansdowne] is to give in order to protect [Xerox
Realty] from liability under the Monetary Proffers." In this
memorandum, Lansdowne further stated that "[t]he amount of
security to be granted by [Lansdowne] is to be distinguished from
the projected cost of construction or comp[l]etion of the
Monetary Proffers, which the [contract] does not request."

On January 22, 1996, Dr. Henry Grausz,
Lansdowne’s principal, met with Louis Canonico, a vice
president of christopher consultants, and gave him the memorandum
requesting an opinion as to the liability to be secured. Canonico
told Grausz that, as an engineering firm, christopher consultants
was not qualified to give an opinion as to liability.

On January 25, 1996, Canonico prepared a letter
for Lansdowne stating that, while christopher consultants
"cannot speak to legal issues relating to proffers or sales
contracts," it had "retained the services" of the
attorney who had provided Lansdowne with the opinion letter.
Relying on the attorney’s opinion that Xerox Realty would
have no liability to perform the proffers after the sale of the
property, the letter goes on to state that "we find that
there is zero dollars liability, in terms of the value of what
would need to be secured relating to [M]onetary [P]roffers as it
impacts the seller of the Lansdowne project." At trial,
Canonico admitted that christopher consultants had not retained
the services of the attorney, and that he had relied on the
opinion letter obtained by Lansdowne in drafting the January 25,
1996 letter. He further testified that in writing the letter,
christopher consultants was not "taking any position as to
what the contract [between Xerox Realty and Lansdowne] required" christopher consultants to perform. Lansdowne did
not provide Xerox Realty with a copy of this letter.

On the day of the scheduled closing, Lansdowne
refused to provide Xerox Realty with the deed of trust called for
in the contract. Based on this refusal, Xerox Realty terminated
the contract.

On March 27, 1996, Lansdowne filed a bill of
complaint against Xerox Realty seeking specific performance of
the contract. Lansdowne alleged that the contract required it to
secure by deed of trust Xerox Realty’s post-transfer
liability for the "Monetary Proffers," not the actual
cost of completing those proffers. Lansdowne further alleged that
christopher consultants was to determine the amount of liability,
if any, to be secured. Asserting that the January 25, 1996 letter
from christopher consultants established that Xerox Realty’s
post-transfer liability was "‘zero dollars,’"
Lansdowne alleged that it was entitled to specific performance of
the contract without having to provide Xerox Realty with the deed
of trust.
[3] In its answer, Xerox Realty denied that a plain reading
of the contract would support Lansdowne’s interpretation
that only Xerox Realty’s liability was to be secured by the deed
of trust. Xerox Realty also sought an award of attorney’s
fees and costs for having to defend the suit.

A hearing was held before the chancellor in
which evidence in accord with the above recounted facts was
received. In an opinion letter dated April 22, 1997, the
chancellor indicated that he would rule in favor of Xerox Realty,
stating:

[T]he Court can find no justification
to vary the express terms of the contract of sale. That
agreement requires that Lansdowne Development Corporation
. . . secure the monetary proffer obligations
to be performed in connection with the development of the
property with a purchase money trust securing completion
of over eighteen million dollars in proffers as
determined by the engineering firm agreed upon by the
parties. The lengthy record is devoid of evidence that it
was the understanding of the parties to leave open for
further consideration the legal determination as to
whether, and to what extent, [Xerox Realty] would have a
continuing obligation to perform the proffers after the
land had been conveyed. Lansdowne failed to tender such a
deed of trust and was in default of its obligation to
settle in accordance with the terms of the
contract. . . . It is not for this court
to rewrite the contract for the parties.

In a decree referencing his opinion letter, the
chancellor awarded judgment to Xerox Realty and appointed a
commissioner in chancery to determine "attorney’s fees
and costs to which [Xerox Realty] is entitled pursuant to [the
contract]." After receiving expert testimony and reviewing
the claims made by Xerox Realty, the commissioner deleted certain
specific claims, reduced certain other claims by ten percent, and
recommended an award of $908,007.73 for attorney’s fees and
$234,100.32 for other litigation expenses to Xerox Realty.

Prior to the commissioner’s hearing,
Lansdowne filed numerous pleadings objecting to Xerox
Realty’s claims for attorney’s fees and costs.
Subsequent to the filing of the commissioner’s report,
Lansdowne filed its exceptions to the report, incorporating its
prior objections. Relevant to this appeal, Lansdowne asserted
that Xerox Realty had not incurred any "litigation
expenses" since all of the attorney’s fees and costs
had been billed to and paid by Xerox Realty’s parent
corporation. Lansdowne further asserted generally that the
attorney’s fees and costs claimed by Xerox Realty were
unreasonable, contending that the case "could have been
handled at typical Loudoun County rates."

In an opinion letter dated January 29, 1998,
the chancellor found that Xerox Realty as "a wholly owned
subsidiary of the Xerox Corporation, and not its parent company,
was liable for, and ultimately held accountable for the legal
services rendered in connection with this case." The
chancellor further found that the fee schedules of the individual
attorneys were reasonable and that "given the limited number
of large law firms in Loudoun County and the relationship which
[Xerox Realty] previously enjoyed with [a Washington, D.C.-based
law firm], it was not unreasonable that Xerox would seek the
services of that firm," when a local firm was required to
withdraw from representation. Accordingly, the chancellor
rejected Lansdowne’s exceptions to the commissioner’s
report and awarded attorney’s fees and costs to Xerox Realty
in the amount determined by the commissioner. This appeal
followed.

DISCUSSION

Several familiar principles govern our
resolution of this appeal. First, when contract terms are clear
and unambiguous, we must construe those terms according to their
plain meaning. Bridgestone/Firestone v. Prince William Square,
250 Va. 402, 407, 463 S.E.2d 661, 664 (1995). Additionally, we
will not insert by construction, for the benefit of a party, a
term not express in the contract. See id. Moreover,
when considering the meaning of any part of a contract, we will
construe the contract as a whole. See Vega v. Chattan
Associates
, 246 Va. 196, 199, 435 S.E.2d 142, 143 (1993).

Although the chancellor permitted the parties
to present extensive parol evidence, his ultimate resolution
rested on "the express terms of the contract of sale"
and, thus, the chancellor implicitly found the contract to be
clear and unambiguous. Moreover, neither party now contends that
parol evidence is necessary to construe the contract in its
favor. Rather, Lansdowne contends that the plain meaning of the
contract is that the Purchase Money Trust would secure Xerox
Realty’s post-sale liability
[4] on
the Monetary Proffers and that christopher consultants was to
determine the amount of that liability. Xerox Realty contends
that the plain meaning of the contract is that the Purchase Money
Trust would secure Lansdowne’s performance of the
Monetary Proffers and that christopher consultants was to
determine the cost of that performance. We agree with Xerox
Realty.

Under the terms of the contract, Lansdowne was
to assume all liabilities relevant to the development and
rezoning proffers made by Xerox Realty including the
"Monetary Proffers." The contract plainly states that
Lansdowne’s "obligations . . . to
perform the Monetary Proffers
shall be secured by the
Purchase Money Trust." (Emphasis added.) Nothing in this
language, or in any other provision of the contract, suggests
that the parties intended the Purchase Money Trust to secure
Xerox Realty’s post-sale liability, and we will not insert
such language for the benefit of Lansdowne. Bridgestone/Firestone,
supra.

Lansdowne further contends that regardless of
the purpose of the security to be provided for the Monetary
Proffers, the determination by christopher consultants in the
January 25, 1996 letter that there was "zero dollars
. . . to be secured relating to the [M]onetary
[P]roffers" was binding on Xerox Realty since the parties
agreed that christopher consultants would determine "[t]he
amount to be secured." We disagree with Lansdowne.

The January 25, 1996 letter Lansdowne procured
from christopher consultants merely expresses an opinion as to
Xerox Realty’s post-sale liability. Nothing in the contract
suggests that the parties contemplated that christopher
consultants, an engineering firm, would provide a legal opinion
as to liability or that such an opinion was relevant to the
determination of "[t]he amount to be secured" for
Lansdowne’s performance of the Monetary Proffers. The
September 7, 1995 letter provided by christopher consultants to
Xerox Realty and sent by Xerox Realty to Lansdowne established
"[t]he amount to be secured," and, as Canonico’s
testimony confirms, nothing in the January 25, 1996 letter was
intended to contradict or displace the estimate given in the
earlier letter.

Lansdowne further contends that Xerox Realty
should be estopped from asserting its right to have
Lansdowne’s performance of the Monetary Proffers secured by
the deed of trust because of the terms of the amended development
plan agreed to by Loudoun County, Xerox Realty, Lansdowne, and
the other landowners. Lansdowne contends that the establishment
of the escrow accounts and trust funds under the amended
development plan eliminated any risk that the proffers would not
be completed and, thus, that Xerox Realty, as a party to this
agreement, waived its right to have completion of the proffers
secured by the deed of trust.

Again, Lansdowne confuses the bargain of the
contract, which required it to secure its performance of the
Monetary Proffers, with the unrelated issue of whether Xerox
Realty might ultimately incur liability as a result of
Lansdowne’s failure to perform. Under the contract,
Lansdowne was obligated to perform the Monetary Proffers and was
required to secure that obligation by providing Xerox Realty with
a deed of trust. This obligation was part of the consideration
Lansdowne was to give in return for the transfer of the property.
It is simply not relevant that Loudoun County, with Xerox
Realty’s agreement, obtained additional means to secure the
ultimate completion of the proffers.

Finally, Lansdowne contends that the chancellor
erred in awarding certain items as "litigation
expenses" to Xerox Realty.
[5] Citing Advanced
Marine Enterprises v. PRC Inc.
, 256 Va. 106, 126, 501 S.E.2d
148, 160 (1998), Lansdowne contends that "library research,
meals, courier services and the like" should not have been
included in the award.

In Advanced Marine, we held that "a
trial court’s discretion to award costs under
. . . the relevant provisions of Code
Sects. 14.1-177 through –201 [now Sect. 17.1-600, et
seq.], is limited only to those costs essential for
prosecution of the suit, such as filing fees or charges for
service of process," id., where the statute granting
the trial court such authority limited the award to "costs
of suit, including reasonable counsel fees." Code
Sect. 18.2-500. In doing so, we noted that the authority for
such awards is in derogation of the common law and, thus, subject
to a strict interpretation. Id. at 125, 501 S.E.2d at 159.

Here, the award of costs is not made pursuant
to a statute, but under a provision of the contract permitting
the prevailing party to recover "all litigation expenses,
including actual attorney’s fees, which shall not be
unreasonable, and court costs." This language is more
comprehensive than that of the statute at issue in Advanced
Marine
. Moreover, we are not required to apply the same
narrow construction to a contract that we apply to a statute in
derogation of the common law.

Nonetheless, we agree with Lansdowne that
"all litigation expenses" cannot be so broadly
construed as to include any charge made by an attorney to a
client in the course of litigation. The record in this case shows
that among other items, Xerox Realty’s attorneys invoiced
several "Conference Room Expenses" in amounts ranging
from $1.50 to $11.00. During the commissioner’s hearing, one
of the attorneys indicated that this charge was for "sodas
and coffee and things of that nature." Additional items
found in the invoices submitted by Xerox Realty to the
commissioner in chancery, apart from the actual legal work of the
attorneys and their paraprofessional staff, include
"Consulting Fees," "Office Supplies,"
"Local Meals," "Local Transportation,"
"Binding," "Miscellaneous," and "Cash
Expense."

Clearly, some of these charges are not direct
costs of litigation and arguably should have been excluded from
the award of costs recommended by the commissioner and approved
by the chancellor. However, as presented to this Court, the
record does not show that Lansdowne made an adequate,
particularized objection to any of these charges during the
commissioner’s hearing or in its exceptions to the
commissioner’s report. Lansdowne’s generalized
exception to the "reasonableness" of the award of costs
was insufficient to direct the chancellor, or this Court, to
which of the myriad individual charges Lansdowne now objects. A
principal function of a commissioner’s hearing is to relieve
the chancellor of the burden of assessing the minutiae of a
complex evidentiary record. Thus, the commissioner’s hearing
was the proper forum in which to assert challenges to individual
items or classes of items of the costs claimed as
"litigation expenses," and it is not the duty of the
chancellor, or of this Court, sua sponte to conduct a
review of the record of the commissioner’s hearing to
determine the legitimacy of every individual item. Accordingly,
we hold that Lansdowne failed to adequately preserve this issue
for appeal. Rule 5:25.

CONCLUSION

For these reasons, we find no reversible error
in the judgment, and we will affirm the chancellor’s decree
denying Lansdowne specific performance of the contract and
awarding litigation expenses to Xerox Realty.

Affirmed

 

 

FOOTNOTES:

[1] Xerox Realty initially negotiated with
Parity Partners, a California partnership controlled by
Lansdowne’s principal.

[2] The firm uses all lower case letters
for its trade name.

[3] Lansdowne also sought monetary damages
under various theories. These claims are not at issue in this
appeal.

[4] Although a local zoning administrator
may bring a legal action to enforce zoning conditions, see
Code Sect. 15.2-2299, we need not, and do not, express an
opinion on the applicability of this statute to Xerox
Realty’s post-sale liability on the Monetary Proffers in
this case.

[5] Lansdowne also reasserts its
contentions that the litigation expenses were actually incurred
by Xerox Realty’s parent corporation and that the fee
schedules of the attorneys were unreasonable. On appeal, the
chancellor’s decree approving a commissioner’s report
will be affirmed unless plainly wrong or without support in the
evidence. Chesapeake Builders, Inc. v. Lee, 254 Va. 294,
299, 492 S.E.2d 141, 144 (1997). The record here adequately
supports the reasonableness of the attorney’s fees
recommended by the commissioner and the chancellor’s
determination that Xerox Reality was ultimately liable for these
fees and the other litigation expenses incurred on its behalf.

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