Rastek Constr. & Dev. Corp. v. Gen. Land Commercial Real Estate Co.
294 Va. 416
| Va. | 2017Background
- Seller agreed to sell commercial property to Buyer with a written purchase agreement and multiple amended closing dates; original closing was "time being of the essence."
- Sale depended on multiple conditions precedent (e.g., final Certificate of Occupancy); closing never occurred and the parties repeatedly amended closing dates.
- Lender held a deed of trust and approved a short-sale that required closing by March 31, 2011; that deadline passed and lender later scheduled foreclosure.
- On the eve of foreclosure (Jan 18, 2012) Buyer’s counsel sent a HUD-1 showing disputed figures that would require Seller to bring substantial funds to closing; parties exchanged revisions but no corrected statement was delivered before foreclosure.
- Lender foreclosed on Jan 19, 2012, bought the property, and later sold it to Buyer. Broker (not a signatory to the sale agreement) sued Seller for the commission provision in the agreement that promised payment “if and only if closing occurs,” claiming Seller prevented closing.
- Trial court awarded Broker a commission, finding Broker a third-party beneficiary, that time was not of the essence (waived), and that Seller wrongfully prevented closing; Supreme Court of Virginia reversed on prevention-doctrine grounds.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did Broker have enforceable third‑party beneficiary rights under the sale agreement? | Broker: provision paying commission at closing vested an independent right in Broker under Va. Code § 55‑22. | Seller: payment was conditioned "if and only if closing occurs" so Broker has no right because closing never occurred. | Court assumed (without deciding) Broker could be a third‑party beneficiary but allowed Seller to assert defenses available to the promisee. |
| Did the contract terminate because "time is of the essence" and closings were not timely? | Broker: parties waived strict time‑of‑the‑essence and extended closing dates by amendments and conduct. | Seller: original clause & multiple failed closing dates meant agreement could be terminated when conditions unmet. | Not decided—court resolved appeal on the prevention doctrine and did not reach this issue. |
| Did Seller wrongfully prevent closing so as to trigger the prevention doctrine and obligate Seller to pay commission? | Broker: Seller’s inability to bring funds and resolve encumbrances shows Seller prevented closing and so cannot rely on the "if and only if closing" condition. | Seller: failure to close resulted from disputed lien allocations, lender short‑sale deadline, and Buyer’s late HUD‑1; Seller did not commit wrongful acts to prevent closing. | Court held prevention doctrine inapplicable as a matter of law: Broker failed to show wrongful, deliberate acts by Seller that but‑for caused the nonoccurrence of closing. |
| Burden and causation for prevention doctrine | Broker: Seller’s financial default and failure to clear liens caused closing to fail. | Seller: plaintiff must prove promisor’s wrongful acts and but‑for causation; here disputes over HUD‑1 figures, lender’s deadline, and unmet conditions broke causation. | Court reaffirmed that prevention requires wrongful hindrance in excess of legal rights and but‑for causation; Broker failed to meet that showing. |
Key Cases Cited
- Whitt v. Godwin, 205 Va. 797 (Va. 1964) (prevention doctrine requires wrongful acts in excess of legal rights to excuse a condition precedent)
- Parrish v. Wightman, 184 Va. 86 (Va. 1945) (offensive use of prevention doctrine where seller’s active conduct purposefully defeated closing and broker commission obligation)
- Boggs v. Duncan, 202 Va. 877 (Va. 1962) (preventing performance is a breach rendering the preventing party liable for resulting damages)
- Thorsen v. Richmond SPCA, 292 Va. 257 (Va. 2016) (nonparty may sue on contract as third‑party beneficiary when clearly intended)