McLeskey v. Ocean Park Investors, Ltd.

• Decision Date: 07 June 1991
• Docket Number: No. 901365,901365
• Citation: 405 S.E.2d 846,242 Va. 51
• Parties: F. Wayne McLESKEY, Jr. v. OCEAN PARK INVESTORS, LTD. Record
• Court: Virginia Supreme Court

Page 846

405 S.E.2d 846

242 Va. 51

F. Wayne McLESKEY, Jr. v. OCEAN PARK INVESTORS, LTD.

Record No. 901365.

Supreme Court of Virginia.

June 7, 1991.

Carl W. Isbrandtsen, Virginia Beach, for appellant.

James A. Evans (John B. Dinsmore, Dinsmore, Evans and Bryant, on brief), Virginia Beach, for appellee.

Present: All the Justices.

RUSSELL, Justice.

In this appeal from a decree rescinding a contract of sale of real property, the dispositive question is whether the party seeking rescission was estopped to do so, having previously sought to enforce the contract. Finding such an estoppel warranted, we will reverse.

On June 5, 1979, F. Wayne McLeskey, Jr., (McLeskey) entered into a contract of sale with Richard S. Foster (Foster) whereby Foster agreed to purchase 14 subdivided but undeveloped lots in the subdivision of Ocean Park, in the City of Virginia Beach. The purchase price was to be $140,000, payable in installments before the date of settlement. Settlement was to occur on or before December 5, 1979, although Foster had an option to extend the time until March 1, 1980. Foster had the option to cancel the contract by forfeiting $5,000 as liquidated damages prior to midnight September 5, 1979, but not thereafter. Foster was obligated to install "all improvements, including but not limited to, streets, curb and gutters, storm drains, street lights, water, sewerage, electricity, telephone, etc." Foster agreed to submit all construction drawings to McLeskey for approval before beginning construction.

The contract did not specify a deadline for the completion of the improvements, but the trial court found that the parties entered into an oral agreement which, in effect, amended the contract by annexing a condition precedent. Under that condition, the parties agreed that Foster must either complete the improvements, or furnish security satisfactory to McLeskey for their completion, before McLeskey would have any obligation to convey the property. That ruling is not challenged on this appeal and is, therefore, the law of the case.

Because McLeskey owned approximately 60 acres of land contiguous to the 14 lots, he had a substantial interest in seeing that the improvements were satisfactorily completed. Foster's street, water, and sewer improvements would be necessary to serve McLeskey's remaining 60 acres.

Through a chain of assignments, Foster's interest became the property of Ocean Park Investors, Ltd., a Virginia corporation (Ocean Park). Ocean Park was dissolved by operation of law on September 1, 1988. The trial court found that Ocean Park's interest in the 1979 contract is now vested in George M. Edwards, Michael Cardwell, and Danny K. Martin, as trustees for the dissolved corporation.

Foster and his assignees made payments of the $140,000 purchase price in installments. The final payment was made in October 1980, after McLeskey had demanded closing. At that time, however, no work had begun on the improvements and McLeskey had made no conveyance of the lots. At the time of trial in the present case in 1990, little or no work had been done on the improvements, and McLeskey continued to retain title to the lots. Foster testified that he and his assignees had been financially unable in 1980 to construct the agreed upon improvements, and unwilling to do so in 1981 because of high interest rates.

Nevertheless, in 1981, Ocean Park filed a chancery suit against McLeskey in the court below, seeking specific performance of the contract. No proceedings were ever had in that suit, and it languished on the docket until July 8, 1987, when the trial court dismissed it for lack of prosecution pursuant to the "five year rule," Code § 8.01-335(B).

In December 1988, Ocean Park initiated the present suit against McLeskey, first filing an action at law claiming damages for McLeskey's alleged breach of contract. McLeskey counterclaimed for damages, alleging that Ocean Park had breached the contract. Ocean Park then obtained a transfer of the case to the chancery side of the court and filed an amended bill of complaint seeking rescission of the contract and, alternatively, damages for breach. Ocean Park's amended bill alleged that it had been ready to perform its part of the contract since 1984, when it obtained a "development loan," but that McLeskey had refused to deliver a deed. McLeskey filed a cross-bill. After hearing the evidence ore tenus, the chancellor ruled that the contract should be rescinded because there had been a failure of consideration and because McLeskey had been unjustly enriched. The chancellor entered a final decree on July 16, 1990, dismissing McLeskey's cross-bill, rescinding the contract of June 5, 1979, and awarding judgment to Ocean Park's trustees in the amount of the $140,000 purchase price. We awarded McLeskey an appeal.

In our view, Ocean Park's conduct in bringing and maintaining a suit...