Ospta v. Summit Group Properties
724 S.E.2d 718
Va.2012Background
- OSPTA partners formed MMP to purchase land, build a medical office, and lease to OSC and CAF tenants.
- CAF offered to buy property; OSC joined to purchase; Summit formed Dec 28, 2007 to purchase and operate the building.
- OSPTA/OSC/CAF signed leases with MMP; Summit later purchased the building and assumed those leases in Sept 2008.
- OSPTA alleged fraud in inducement; Summit allegedly concealed OSC’s plans to open in-house physical therapy and induce the lease.
- Trial court instructed the jury with Instruction 15 (fraud requires authorization by Summit members); verdict for Summit.
- Appeal challenged Instruction 15 as incomplete/misleading; court reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Instruction 15 correctly stated the law on LLC liability for fraud | OSPTA: instruction omits ordinary course language; misleading. | Summit: instruction tracks requirement of member authorization under not in ordinary course. | Instruction 15 erroneous; not a correct statement of law. |
| Whether acts in the ordinary course bind the LLC under Code § 13.1-1021.1(A)(2) | OSPTA: acts of Summit members in ordinary course can bind LLC. | Summit: misrepresentations occurred pre-Summit or not in ordinary course; not binding. | Code § 13.1-1021.1(A)(2) applies to ordinary-course acts; fraud here was not clearly within ordinary course. |
| Whether the error in Instruction 15 was harmless | OSPTA: misinstruction could mislead jury about need for member authorization. | Summit: harmless because evidence does not show ordinary-course fraud. | Harmless error not established; may have misled jury. |
| Whether the judgment should be reversed and remanded | OSPTA seeks reversal due to error and remand for proper instruction. | Summit contends harmless error; seeks affirmation if possible. | Judgment reversed and remanded for proceedings consistent with opinion. |
Key Cases Cited
- Bennett v. Sage Payment Solutions, Inc., 282 Va. 49 (2011) (standard for when instructed law accurately states applicable facts)
- Williams v. Cong Le, 276 Va. 161 (2008) (evidence must amount to more than a scintilla to support an instruction)
- Riverside Hosp., Inc. v. Johnson, 272 Va. 518 (2006) (harmless error doctrine when erroneous instruction potentially misleading)
- Blue Stone Land Co. v. Neff, 259 Va. 273 (2000) (harmless error doctrine controlling outcome when error cannot affect result)