767 S.E.2d 459
Va.2015Background
- Donald Devine purchased and renovated Rock Hall, then sold it in 2007 to Charles Buki and Kimberly Marsho for $590,000; promotional materials claimed the house had been "completely restored."
- The purchase contract contained an "as is" Disclaimer Statement; a home inspection disclosed marginal windows, some moisture and limited insect evidence.
- After closing, buyers discovered extensive rot and termite damage to the foundation sill and hidden replaced siding/trim, and mold and water damage around windows.
- Buyers sued, alleging fraudulent inducement, concealment, and a VCPA claim; commissioner and trial court found Donald fraudulently induced the sale, awarded rescission, consequential damages, prejudgment interest, and attorney’s fees.
- Trial court later vacated the VCPA-based multiplier and VCPA attorney’s fees, but reinstated attorney’s fees on fraud; it refused punitive damages.
- On appeal the Supreme Court affirmed rescission and attorney’s fees for fraud, reversed the awards of consequential damages and prejudgment interest, and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether court lacked equitable jurisdiction to rescind because fraud was proven only against husband (Donald) and not wife (Nancy) | Buki/Marsho sought rescission and return to status quo; equitable relief may be fashioned to restore parties | Donald: Larkey requires dismissal where jurisdictional allegations prove unfounded; rescission against only one spouse improper | Court: Larkey inapplicable; court retains jurisdiction and may fashion equitable relief against the wrongdoer even if co-owner not shown to have committed fraud |
| Whether concealment of condition after contract formation can support fraudulent inducement to perform (and rescission) | Buyers: concealment of sill condition induced closing/performance and voids "as is" disclaimer | Donald: disclaimer and timing preclude fraud claim; concealment only affected closing, not contract formation | Court: Fraudulent inducement to perform is actionable; "as is" disclaimer does not bar fraud; rescission appropriate for concealment |
| Whether consequential damages (interest on mortgages, taxes, insurance, replacement windows) can be awarded along with rescission | Buyers: sought restitution and consequential losses tied to having owned property | Donald: those payments were to third parties and not a benefit to him; such damages exceed rescission relief | Court: Reversed consequential damages—restitution limited to benefit received by seller (sale price); compensatory/ consequential damages require separate claim and were abandoned |
| Whether prejudgment interest and attorney’s fees were properly awarded | Buyers: sought attorney’s fees and contended interest discretionary | Donald: prejudgment interest not pleaded; contract rescinded so contract-based fee provision invalid | Court: Prejudgment interest is special damages and must be pleaded—award reversed; attorney’s fees may be awarded in equity for fraud—award affirmed |
Key Cases Cited
- Larkey v. Gardner, 105 Va. 718 (limited rule on jurisdiction where equitable basis fails)
- Ware v. Scott, 220 Va. 317 (fraudulent inducement to perform recognized)
- Packard Norfolk, Inc. v. Miller, 198 Va. 557 (contract induced by fraud is voidable; seller cannot take contract benefits and avoid fraud consequences)
- George Robberecht Seafood, Inc. v. Maitland Bros. Co., 220 Va. 109 ("as is" disclaimers do not bar fraud claims)
- McLeskey v. Ocean Park Investors, Ltd., 242 Va. 51 (rescission restores parties to status quo ante)
- Lee v. Laprade, 106 Va. 594 (interest on amounts paid is recoverable only as damages for wrongful detention)