THE CIRCUIT COURT OF THE CITY OF CHESAPEAKE. Marjorie A. T.
Taylor Arrington, Judge.
Reversed and final judgment.
BANK OF HAMPTON ROADS, JACK W. GIBSON, (TRUSTEE), JULIE R.
ANDERSON, (TRUSTEE), Appellants: RICHARD HOYT MATTHEWS,
(ESQ.), KRISTEN RODRIGUE JURJEVICH, (ESQ.).
ETHEL B. POWELL, Appellee: GREGORY SLACK LARSEN, (ESQ.).
All the Justices
W. LEMONS, CHIEF JUSTICE
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.
Facts and Proceedings
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 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.
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.
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.
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. Upon request of both
parties, the trial court dismissed Powell's claim against
Ashdon with prejudice, thereby releasing Powell's claim
to Lot 1.
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.
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
the trial court imposed an additional and unusual conditional