Condominium Services, Inc. v. FOA
709 S.E.2d 163
| Va. | 2011Background
- FOA and CSI entered a two-year Management Agreement (Nov 1, 2005–Oct 31, 2007) under which CSI was FOA's management agent for a monthly fee of $6,075.
- FOA terminated CSI for cause effective Aug 1, 2006; CSI opened a FOA-name bank account and collected assessments, paying itself $91,125 in management fees thereafter.
- FOA alleged conversion of FOA funds and breach of contract; CSI asserted FOA needed unit-owner votes per Bylaws for termination.
- The Management Agreement referenced the Bylaws but did not expressly incorporate them to control termination; FOA's act of termination was without a vote.
- FOA prevailed at trial on both breach-of-contract and conversion claims; the jury awarded damages including punitive damages of $275,000.
- CSI challenged evidentiary rulings, expert testimony on taxes/penalties, and the sufficiency of damages, as well as the circuit court’s denial of remittitur.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the circuit court correctly interpret the Management Agreement's relation to the Bylaws | FOA: Bylaws referenced but not incorporated to require a vote; termination allowed without owner vote. | CSI: Bylaws incorporated, requiring a 3/4 vote for termination of the management contract. | Bylaws not incorporated to control termination; termination without vote permitted. |
| Is FOA's conversion claim legally independent of contract | Conversion occurred after termination; acts constituted an independent tort. | Conversion lacks independent tort basis if arising from contract. | Conversion is independent of contract; summary judgment proper for FOA on conversion. |
| Was FOA's expert designation on damages, particularly tax penalties, sufficient | designation disclosed subject matter and grounds for opinions; sufficient under Rule 4:1(b)(4)(A)(i). | Designation inadequate for precise amounts in penalties/interest. | Designation sufficient; expert testimony admitted. |
| May FOA recover tax penalties/interest damages with reasonable certainty | Penalties already assessed or reasonably estimable; FOA incurred liability. | Some penalties not yet assessed; damages speculative. | Damages proven with reasonable certainty; some penalties as intelligent estimates permitted. |
| Whether the punitive damages award was proper or should be remitted | Punitive damages supported by conscious disregard; not excessive. | Remittitur required; award excessive. | Punitive damages affirmed; no remittitur warranted. |
Key Cases Cited
- Ross v. Craw, 231 Va. 206, 343 S.E.2d 312 (1986) (contract interpretation harmonization of conflicting provisions)
- Plunkett v. Plunkett, 271 Va. 162, 624 S.E.2d 39 (2006) (harmonize contract provisions; special over general)
- Mutual Life Ins. Co. v. Hill, 193 U.S. 551, 24 S. Ct. 558, 48 L. Ed. 788 (1904) (specific clause controls over general terms)
- Dunn Construction Co. v. Cloney, 278 Va. 260, 682 S.E.2d 943 (2009) (independent tort distinct from contract for conversion)
- PGI, Inc. v. Rathe Prods., Inc., 265 Va. 334, 576 S.E.2d 438 (2003) (conversion requires independent tort theory)
- Sykes v. Brown, 156 Va. 881, 159 S.E. 202 (1931) (damages incurred even if not yet paid may be recoverable)
- E.I. du Pont de Nemours & Co. v. Universal Moulded Prods. Corp., 191 Va. 525, 62 S.E.2d 233 (1950) (loss proof may rely on intelligent and probable estimates)
- Bussey v. E.S.C. Rests., Inc., 270 Va. 531, 620 S.E.2d 764 (2005) (standard for reviewing punitive damages)
- Poulston v. Rock, 251 Va. 254, 467 S.E.2d 479 (1996) (remittitur factors for punitive awards)
- Philip Morris, Inc. v. Emerson, 235 Va. 380, 368 S.E.2d 268 (1988) (punitive damages proportionality guidance)
- Smithey v. Sinclair Refining Co., 203 Va. 142, 122 S.E.2d 872 (1961) (remittitur standard for excessive awards)