Brooks v. Bankson

• Decision Date: 10 June 1994
• Docket Number: No. 930980,930980
• Citation: 445 S.E.2d 473,248 Va. 197
• Parties: Robert W. BROOKS, et al. v. Rodney A. BANKSON, et al. Record
• Court: Virginia Supreme Court

Page 473

445 S.E.2d 473

248 Va. 197

Robert W. BROOKS, et al. v. Rodney A. BANKSON, et al.

Record No. 930980.

Supreme Court of Virginia.

June 10, 1994.

Peter J. Judah, Hot Springs (Michael E. Wood, on briefs), for appellants.

R. Creigh Deeds, Warm Springs (Singleton & Deeds, on brief), for appellees.

Present: CARRICO, C.J., COMPTON, WHITING, LACY, HASSELL, and KEENAN, JJ., and POFF, Senior Justice.

KEENAN, Justice.

In this case involving an action by the sellers of real estate against the buyers for breach of contract, we hold that the trial court erred in its interpretation of a contract provision relating to the condition of the property.

In a contract of purchase (the contract) dated February 20, 1992, Rodney A. Bankson and Patricia N. Bankson (the Buyers) agreed to purchase a 30-acre parcel of land located in Bath County from Robert W. Brooks and Patricia M. Brooks (the Sellers). The property to be sold included an older house, constructed about 1895, which the Sellers had restored in the early 1980s. The contract provided for conveyance and transfer of possession on June 12, 1992.

The contract was drawn on a standard form prepared by the Sellers' broker, incorporating blank spaces where specific contract terms could be typed. In Paragraph 2 of the contract, the blank lines were completed with the purchase price of $245,000, which was to be paid "$5,000.00 with contract: remaining cash at closing." Thereafter, in the blank spaces available in Paragraphs 2 [248 Va. 200] and 4 of the contract, the language set forth below was added. Asterisks preceded the typed-in language in Paragraphs 2 and 4, evidently in order to indicate connection of the separated blocks of text into a single provision.

* In the event of the below described owner financing, the purchasers will be required to put a minimum of 10% ($24,500.00) down. by [sic] executing this contract the purchasers agree to pay an additional $19,500.00.

* cash on the 6/12/92 closing date. This sum, plus the $5,000.00 deposit will be forfeited in the event of buyer default with the total of $24,500.00 being paid directly to the sellers.

An additional typed-in provision granted the Buyers the option to obtain a seller-financed mortgage with a 10% down payment.

Paragraph 8, consisting entirely of preprinted language, was entitled "Risk of Loss/Inspection/Walk Through," and provided in material part:

All risk of loss or damage to the Property by fire, windstorm, casualty or other cases [sic] is assumed by the Seller until settlement.... The Purchaser, by acknowledging this Contract, represents that a satisfactory inspection has been made of the Property and the Purchaser agrees to accept the Property in its present condition except as may be otherwise provided. The Purchaser further has the right to do a "walk through" inspection of the subject Property prior to settlement to inspect the condition of the premises.

Paragraph 11, also entirely preprinted, was entitled "Default" and provided in material part:

The defaulting party is also responsible for any damages and all expenses incurred by the non-defaulting party in connection with this transaction and the enforcement of this Contract including without limitation, attorney's fees and costs, if any.

An addendum to the contract stated that the Sellers would also provide the Buyers a deed of water rights to a spring intended to serve the residence. The parties further attached a sketch depicting the tentative boundaries between the parcel to be conveyed and the Sellers' retained land.

On June 10, 1992, two days before the scheduled closing date, Rodney Bankson (the Buyer) and an electrical contractor, Robert Foxwell, visited the property and conducted the "walk through" inspection referred to in Paragraph 8 of the contract. Thereafter, by correspondence between their respective attorneys, the Buyers notified the Sellers that they would not honor the contract for purchase of the property.

The Sellers brought a motion for judgment against the Buyers, alleging breach of contract. The Sellers demanded judgment in the amount of $50,000, consisting of the sum of $24,500 specified in Paragraph 2 of the contract, and additional "damage[s] and all expenses incurred" pursuant to Paragraph 11. In their answer to the motion for judgment, the Buyers denied that they were in breach of the contract or that they were obligated to pay the amounts sought. The Buyers did not plead any affirmative defenses.

In answers to interrogatories, the Buyers contended that the Sellers had made numerous false representations and had failed to disclose material facts regarding the premises. The Buyers stated that these misrepresentations and non-disclosures concerned

the quality and supply of water available on the property, the condition of the septic system available on the property, the total amount of square footage in the residence located on the property, the condition of the framework and the foundation of the residence on the property[,] and the location of the boundary lines for the property.

The case proceeded to trial by jury on April 19, 1993. Immediately before the start of trial, the trial court held a conference. Although no record was made of this conference, both parties agree on appeal that the trial court limited the scope of evidence to be received at trial. The court ruled that parol evidence would be admissible on three issues: (1) whether there was a functional well on the property; (2) whether potable water could be obtained from the spring intended to serve the property; and (3) whether the deed tendered by the Sellers described the same boundary lines as those contemplated by the contract.

After the Sellers had presented their case in chief, the attorney for the Buyers moved to strike the Sellers' evidence, asserting that the sum of $24,500 sought by the Sellers pursuant to the contract provision was an unenforceable penalty. The trial court overruled this motion, holding that the sum specified in the contract was not a penalty but liquidated damages, and that Paragraph 11, which imposed upon the defaulting party the responsibility for "any damages," included the liquidated damages provided for in the contract. The trial court ruled that, if the Sellers prevailed, they would recover $24,500 plus costs and attorney's fees.

The Buyers began their defense by calling Rodney Bankson. When his testimony apparently had been concluded, and outside the jury's presence, the Buyers proffered testimony that had been excluded by the court's pretrial ruling, concerning defects discovered in the crawl space of the house during the "walk through" inspection on June 10, 1992. After receiving the proffer, the trial court reversed its pretrial ruling and held that evidence of defects discovered during the "walk through" inspection would be admitted. The trial court explained that it interpreted Paragraph 8 of the contract to give the Buyers the right to conduct a further inspection on the date of the "walk through" before accepting the property. The trial court stated:

These two sentences in paragraph 8 [of the contract] have to be read together.... It says, "The purchaser represents a satisfactory inspection has been made and agrees to accept the property in its present condition except as may be otherwise be [sic] provided." The "except as may be otherwise provided" is the next sentence, that is, that he has a right to walk through and inspect the premises prior to settlement[,] so the two have to be [read] together.... I think anything he discovered on the walk through to the extent that it relates to the condition of the premises is admissible....

The trial court further explained that it based its ruling on "the plain language of the contract."

The Sellers' attorney objected to this ruling. He cited the doctrine of caveat emptor and noted that the Buyers had not asserted that they should be exempted from this doctrine, since they had not pleaded fraud or any material misrepresentation. The Sellers' attorney further argued that the court's interpretation of Paragraph 8 of the contract was incorrect, stating that "the walk through is only for the purposes of comparing the property in [its] as is condition on the date you sign [a contract] and the date when you walk through."

Upon being recalled to the witness stand, Bankson (the Buyer) was permitted to testify that he had been unable to gain access to the crawl space of the house before the contract was signed, but that he inspected it on the date of the "walk through" inspection, when a farm manager showed him how to enter the crawl space through a trap door. Bankson testified that he observed moisture underneath the house and that he was unable to locate any means of crawl space ventilation. The Buyers then called other witnesses, including Richard Thornton, an architect, and Robert Foxwell, the electrical contractor who had accompanied Bankson during the "walk through," who testified regarding these and other conditions. The Sellers cross-examined these witnesses and put on evidence in rebuttal regarding the quality of the spring water, the condition of the floor joists, the boundaries of the property, and other matters.

The jury returned a verdict in favor of the Buyers. The trial court overruled the Sellers' motions to set aside the verdict and for a new trial.

On appeal, the Sellers contend that the trial court erred in failing to set aside the jury's verdict and in admitting evidence of conditions discovered during the "walk through." They argue that the trial court erred in refusing to set aside the verdict, because it misinterpreted the provisions of the contract and failed to apply the doctrine of caveat emptor. The Sellers contend that they also were prejudiced by the trial court's decision to alter its ruling regarding the admissibility of evidence after the Sellers had concluded their case in chief. The Buyers oppose these contentions,...