Devine v. Buki

289 Va. 162

767 S.E.2d 459

Donald M. DEVINE, Jr.

v.Charles Z. BUKI, et al.

Record No. 140301.

Supreme Court of Virginia.

Jan. 8, 2015.

Jon F. Mains (Mains & Associates, on briefs), Fairfax, for appellant.

A. Davis Bugg, Jr. (Albert D. Bugg, III ; Rumsey & Bugg, Irvington, on brief), for appellees.

Present: LEMONS, C.J., GOODWYN, MILLETTE, MIMS, McCLANAHAN, and POWELL, JJ., and LACY, S.J.

Opinion

Opinion by Justice CLEO E. POWELL.

Donald M. Devine, Jr. (“Donald”) appeals the judgment of the trial court rescinding the sale of the property known as Rock Hall to Charles Z. Buki (“Buki”) and Kimberly A. Marsho (“Marsho”). He further appeals the trial court's award of consequential damages and attorney's fees. Buki and Marsho assign cross-error to the trial court's denial of their claim under the Virginia Consumer Protection Act (“VCPA”), Code § 59.1–196 et seq., and their request for attorney's fees.

I. BACKGROUND

Rock Hall is a wood frame house that is more than 200 years old. The main structure of the house is supported by a large wood beam (the “foundation sill”) resting on a masonry wall. In March, 2004, Rock Hall was bought by Acorn Properties, a company owned by Donald. In January, 2005, Acorn Properties transferred ownership of Rock Hall to Donald and his wife, Nancy W. Devine (“Nancy”).

Donald subsequently began the process of renovating and restoring Rock Hall. Donald performed some of the work by himself and hired contractors to do the rest. In June, 2005, Shannon Swindell (“Swindell”) was hired by Donald to remove the aluminum siding and re-paint the original wooden siding found underneath. According to Swindell, all of the siding appeared to be old and there were no new boards on the bottom of the house. Donald also hired Danny Beall (“Beall”) to perform a number of tasks, including rebuilding the front and rear porches; reframing, insulating and rehanging sheetrock on the interior walls; repainting the living room; installing three new bathrooms and a kitchen; and some masonry work. Beall did not do any work on the wooden siding or corner posts of Rock Hall.

In December, 2006, Donald decided to sell Rock Hall to generate the cash necessary to purchase another property. Donald listed Rock Hall for sale with Rebecca Lemmon (“Lemmon”), a local realtor. Lemmon, with Donald's input, created promotional literature that was given to potential buyers, including Buki and Marsho. The promotional literature stated:

• Rock Hall had been “completely restored;”

• Rock Hall's foundation had been restored;

• Rock Hall was “completely renovated and restored between 2004 and 2005 from the wood plank floors and molding to the portico, and from the brick foundations to the roof and chimney.”

The promotional literature also cautioned that the information was provided by the seller and deemed accurate, but it was not guaranteed.

On January 22, 2007, Buki and Marsho signed a contract agreeing to purchase Rock Hall for $590,000 (the “Real Estate Contract”). The Real Estate Contract included a “Disclaimer Statement” which stated that the owners made no representations or warranties as to the condition of the property and the purchaser would be receiving the property “ ‘as is' ... with all defects which may exist, if any, except as otherwise provided in the real estate purchase contract.”

On February 2, 2007, William Knight (“Knight”), a home inspector, inspected the property with Buki and Marsho present. He noticed that some of the window frames were warped, allowing air to enter. As a result, Knight determined that the windows and siding were only in “marginal” condition, meaning that they were “functional” but required “immediate maintenance” and likely would need to be replaced within five years. Additionally, he found a water stain and mold forming on the living room ceiling. Knight also noted some moisture damage in the basement and some evidence of boring insect damage to the rear sill. Overall, however, he “told [Buki and Marsho] that he found nothing that would cause him to tell a potential purchaser not to buy Rock Hall.”

Due to Knight's report, Buki and Marsho had Jeffrey T. Cox, Sr. (“Cox”), perform a subsequent inspection on the property, focusing primarily on the insect damage. Cox also noted the moisture and insect damage in the basement. However, according to Cox, the termite damage was limited to one basement window and a baseboard. Cox stated that, based on what he could see at the time, there was no evidence of termite damage anywhere else in the house or that there was an active termite infestation in the home. Regarding the moisture damage, Cox stated that it was not out of the ordinary for that area.

On February 4, 2007, an addendum was added to the Real Estate Contract. In the addendum, Buki and Marsho requested a number of repairs based on the results of the home inspection. Referring to the stain on the living room ceiling, Buki and Marsho requested that Donald and Nancy “find [the] source of [the] moisture and repair/replace. Treat mold and paint/repair.” Lemmon informed Buki and Marsho's agent that the stain on the living room ceiling was caused by a window being left open during Hurricane Ernesto, which struck the area on September 1, 2006. The stain was repaired and painted.

The real estate closing occurred on March 9, 2007. Shortly thereafter, Buki and Marsho noticed water leaking from the east wall and the east- and south-facing windows when there was wind-driven rain from the east or south. They also noticed water leaking from the living room ceiling. Buki and Marsho hired Tom Brown (“Brown”) to install new windows. Brown discovered mold and sheet rock damage around all of the windows on the east wall. According to Brown, the damage was not from a single event, but likely had been on-going for some time. Additionally, Brown discovered that the exterior siding had significant cracks and recommended that it be replaced. He recommended another contractor, Bruce Stanley (“Stanley”).

On September 4, 2007, Brown and Stanley inspected the siding of Rock Hall. They noticed that the lower courses of siding, as well as portions of the corner posts, had been replaced with new material. After removing the lower courses, they discovered that the foundation sill and corner boards were substantially damaged by rot and termite damage. As a result, the structural integrity of the house was significantly compromised.

On December 6, 2007, Buki and Marsho brought suit against Donald and Nancy. Buki and Marsho alleged that Donald and Nancy fraudulently induced them to enter into the Real Estate Contract and to close on Rock Hall by misrepresenting and concealing the true condition of Rock Hall. Initially, they only sought rescission of the Real Estate Contract or, in the alternative, compensatory damages for replacement of the windows and repairs to the sill. In their second amended complaint, they added a claim under the VCPA.

The trial court referred the matter to a commissioner in chancery. After holding an evidentiary hearing, the commissioner found that Buki and Marsho had been fraudulently induced into entering the Real Estate Contract and closing on Rock Hall. He further determined that Buki and Marsho were entitled to rescission of the Real Estate Contract and damages in the amount of $163,099.79, representing the cost of the replacement windows ($27,970.38), the interest Buki and Marsho paid on their first ($106,936) and second ($17,667) mortgages on the property, the property insurance expended by Buki and Marsho ($4,301.41), and the real estate taxes Buki and Marsho paid on the property ($6,225). Finding that the fraud was a willful violation of the VCPA, the commissioner doubled the damages pursuant to Code § 59.1–204(A) and awarded attorney's fees and costs pursuant to Code § 59.1–204(B). As the damages were doubled under the VCPA, the commissioner declined to award punitive damages.

Donald and Nancy filed several exceptions to the commissioner's report. After considering the matter, the trial court determined that there was sufficient evidence to find that Donald had fraudulently induced Buki and Marsho to buy Rock Hall. The trial court focused on the false statements in the promotional literature, the concealment of the damage to the sill and misrepresentation as to the source of the living room ceiling stain.

However, the trial court also found that Buki and Marsho had failed to allege or prove that Nancy had committed any fraudulent acts. The trial court noted that there was no evidence that Nancy took any part in the fraud, aside from signing the Real Estate Contract and the other documents pertaining to the sale of Rock Hall. The trial court pointed out that the commissioner made no findings with regard to Nancy or attributed any fraud, misrepresentation or concealment to her. The trial court determined that, at most, Nancy “reaped the benefit” of the sale of Rock Hall.

Ultimately, the trial court granted rescission of the Real Estate Contract. Although it found that there was no evidence Nancy committed any fraud, the trial court determined that it would be fair and equitable to require her “to be responsible jointly and severally with her husband for the repayment of the purchase price” of Rock Hall. The trial court noted that, upon repayment, Donald and Nancy would receive Rock Hall and, therefore, be returned to the status quo ante. In conjunction with awarding rescission, the trial court also awarded prejudgment interest on the purchase price of Rock Hall, running from the date of closing.

The trial court also affirmed, in large part, the commissioner's decision to award consequential damages. However, the trial court determined that Buki and Marsho should not be reimbursed for the replacement windows. According to the trial court, by replacing the windows instead of immediately bringing an action for rescission, Buki and Marsho were limited to seeking actual damages for the money they expended on the windows. The...