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Bank of Hampton Rds. v. Powell

Supreme Court of Virginia

June 2, 2016

THE BANK OF HAMPTON ROADS, ET AL., [1]
v.
ETHEL B. POWELL

          FROM THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE. Marjorie A. T. Taylor Arrington, Judge.

          Reversed and final judgment.

         THE BANK OF HAMPTON ROADS, JACK W. GIBSON, (TRUSTEE), JULIE R. ANDERSON, (TRUSTEE), Appellants: RICHARD HOYT MATTHEWS, (ESQ.), KRISTEN RODRIGUE JURJEVICH, (ESQ.).

         For ETHEL B. POWELL, Appellee: GREGORY SLACK LARSEN, (ESQ.).

         PRESENT: All the Justices

          OPINION

         DONALD W. LEMONS, CHIEF JUSTICE

         In this appeal, we consider whether the trial court erred in imposing a constructive trust upon a subdivision lot after a developer breached a contract to convey a different property.

         I. Facts and Proceedings

         Ethel B. Powell (" Powell" ) owned a house and a parcel of land on Waters Road in the City of Chesapeake, Virginia. In 2003, a subdivision development company, 3 MAC II, LLC (" 3 MAC" ) approached Powell with an offer to purchase her property. 3 MAC and its manager-members[2] sought to develop a subdivision to be known as North Rollingwood Estates, and they wanted to include Powell's land in the subdivision. The Bank of Hampton Roads (" Bank" ) extended loans for 3 MAC to acquire the land and develop the subdivision.

         On November 7, 2003, Powell signed a contract to convey her property to 3 MAC in exchange for $265,000 and " one (1) lot to be mutually agreed upon by both Buyer and Seller in writing." Powell conveyed her land to 3 MAC on May 11, 2004. Thereafter, on January 28, 2005, Powell and 3 MAC prepared an addendum to the contract stipulating that Powell would receive the lot designated as Lot 1 on the preliminary subdivision plat for North Rollingwood Estates.[3]

         On several occasions over the next few years, Powell allegedly asked 3 MAC and its member-managers to convey Lot 1 to her in accordance with the contract. In her complaint, Powell claimed that Sancilio " repeatedly assured [her] that he was going to make the conveyance but continually fabricated on[e] excuse after the other...." Instead of fulfilling its contractual obligation to convey Lot 1 to Powell, 3 MAC negotiated to sell the same lot to Ashdon Builders, Inc. (" Ashdon" ). On February 15, 2012, Ashdon purchased Lot 1 for $110,000.

         Upon learning that 3 MAC had sold Lot 1, Powell brought suit in the Circuit Court of the City of Chesapeake (" trial court" ) against 3 MAC, Ashdon, Hostetler, Hanley, and several others. Although the Bank was not named in Powell's first complaint, Powell later amended her complaint to add the Bank as a co-defendant. Powell's complaint alleged breach of contract and fraudulent conveyance. Powell also sought the imposition of a constructive trust upon Lot 1. On February 28, 2013, Powell settled her claim against Ashdon.[4] Upon request of both parties, the trial court dismissed Powell's claim against Ashdon with prejudice, thereby releasing Powell's claim to Lot 1.

         Powell continued to pursue her claims against 3 MAC and the Bank. Since she could no longer assert a claim against Lot 1, Powell asked the trial court to impose a constructive trust upon the remaining land owned by 3 MAC and which had not yet been sold. This remaining property, known as " Lot A," was subject to the Bank's recorded first-lien deed of trust, and Powell sought imposition of a constructive trust upon Lot A superior to the Bank's deed of trust. After a bench trial, the trial court held that the Bank had actual knowledge of Powell's right to a lot in the subdivision, and that the Bank's " wrongdoing robbed [Powell] of possession of the original lot specified in her contract" with 3 MAC. The trial court held that Powell had established, by clear and convincing evidence, that she was entitled to a constructive trust upon Lot A.

         The Bank filed a motion to reconsider which was denied by the trial court, and the trial court entered final judgment against the Bank, 3 MAC and its manager-members. In its Final Judgment Order the trial court imposed a constructive trust upon Lot A and further decreed that,

3MAC II, LLC shall convey said property to Plaintiff free and clear of any liens or encumbrances and Defendants Bank of Hampton Roads, Jack W. Gibson, Trustee and Julie R. Anderson, Trustee shall release any lien, encumbrance or claim to said property

         However, the trial court imposed an additional and unusual conditional ...


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