Niblock v. Mercedes Benz Credit ( 1998 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
JAMES NIBLOCK,
Plaintiff-Appellant,
v.
No. 97-1229
MERCEDES BENZ CREDIT
CORPORATION,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, District Judge.
(CA-96-1333-A)
Argued: October 27, 1997
Decided: January 27, 1998
Before WIDENER and MURNAGHAN, Circuit Judges, and
PHILLIPS, Senior Circuit Judge.
_________________________________________________________________
Affirmed by unpublished per curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: Matthew Childs Ackley, WHITESTONE, BRENT,
YOUNG & MERRIL, P.C., Fairfax, Virginia, for Appellant. Shannon
Jill Briglia, WICKWIRE GAVIN, P.C., Vienna, Virginia, for Appel-
lee. ON BRIEF: Robert J. Cunningham, Jr., Hunter A. Whitestone,
WHITESTONE, BRENT, YOUNG & MERRIL, P.C., Fairfax, Vir-
ginia, for Appellant. Brian P. Waagner, WICKWIRE GAVIN, P.C.,
Vienna, Virginia, for Appellee.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
The contract dispute before us arises out of the lease of two
Mercedes-Benz automobiles to James Niblock ("Niblock").
Mercedes-Benz Credit Corporation ("MBCC"), the assignee of the
leases, sued Niblock in Virginia state court after Niblock failed to
make lease payments. The parties entered into a settlement agreement
that required Niblock to surrender the two Mercedes vehicles to
MBCC. In exchange, MBCC agreed to nonsuit the state action and to
report Niblock's accounts as current to any credit bureaus listing the
accounts.
Niblock later sued MBCC in Virginia state court, claiming that
MBCC had breached the settlement agreement by failing to correct
earlier adverse credit reports. MBCC removed the action to the
United States District Court for the Eastern District of Virginia and
filed a counterclaim against Niblock, seeking a deficiency judgment
in the amount still owing on Niblock's accounts with MBCC. The dis-
trict court entered summary judgment in favor of MBCC on all
claims. We affirm.
MBCC is a Delaware corporation with its principal place of busi-
ness in Norwalk, Connecticut. Niblock is a citizen of Virginia. The
amount in controversy exceeds the sum of $75,000. MBCC timely
filed a notice of removal pursuant to 28 U.S.C.§§ 1441 and 1446(b).
Jurisdiction in the district court was therefore proper pursuant to 28
U.S.C. § 1332. We have jurisdiction of the appeal under 28 U.S.C.
§ 1291.
Niblock's contract claim against MBCC presents two issues for our
decision: (1) whether Niblock's failure to return the vehicles by the
time and date specified in the settlement agreement constitutes a
material breach that bars Niblock from suing on the contract, and (2)
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whether MBCC waived Niblock's breach. Finally, we must determine
whether any genuine issue of material fact exists regarding Niblock's
liability to MBCC for the deficiencies remaining on the leases.
We review the district court's grant of summary judgment de novo.
Summary judgment is proper only when "there is no genuine issue as
to any material fact and . . . the moving party is entitled to judgment
as a matter of law." Fed. R. Civ. P. 56(c); see Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 247 (1986); Evans v. Technologies Appli-
cations & Serv. Co., 80 F.3d 954, 958 (4th Cir. 1996). We view all
facts and inferences in the light most favorable to Niblock, the non-
moving party. Nguyen v. CNA Corp., 44 F.3d 234, 236-37 (4th Cir.
1995).
I.
In August 1992, Lenders Financial Corporation ("Lenders") exe-
cuted a lease of a Mercedes-Benz 500SL (the "500SL lease") which
Niblock, the president of Lenders, signed as a guarantor. The lease
agreement provided that Lenders and Niblock were jointly and sever-
ally liable for payments due under the 500SL lease. Approximately
two years later, Niblock individually executed a lease of a Mercedes-
Benz S420V. Both leases were subsequently assigned to MBCC.
The present dispute arose when MBCC failed to provide Niblock
with certain documents required to obtain license plate registration
stickers from the Virginia Department of Motor Vehicles. Niblock
advised MBCC on three separate occasions that the annual registra-
tion period was approaching, and threatened to withhold rental pay-
ments until he received the needed documents. When MBCC failed
to respond to Niblock's repeated requests, Niblock withheld payment
on the vehicle leases. As a consequence, Niblock defaulted on both
leases.
On November 17, 1995, MBCC sued Niblock in the Circuit Court
for Fairfax County, Virginia, seeking possession of the vehicles or
payment of the amounts owed under the leases. After several months
of negotiations, Niblock and MBCC executed a written settlement
agreement on January 31, 1996.
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The settlement agreement required Niblock to return both vehicles
to an independent dealership in Vienna, Virginia by the close of busi-
ness on February 2, 1996. In exchange, MBCC agreed to nonsuit the
state action and to report promptly to credit bureaus that Niblock's
accounts were current and had zero balances. The settlement agree-
ment did not limit MBCC's right to recover from Niblock the
amounts payable under the two leases.
Niblock failed to return either vehicle by the date specified in the
settlement agreement. On February 5, MBCC repossessed the 500SL
at Niblock's Virginia home. In a letter of February 6, counsel for
MBCC set a new deadline of February 7 for the return of the S420V
at the Virginia dealership.
Niblock delivered the S420V to a Mercedes dealership in Pom-
pano, Florida, on February 12, 1996, five days after the second deliv-
ery date. By letter of February 13, 1996, MBCC counsel informed
Niblock's attorney that the vehicle had been received and that MBCC
would dismiss the state court suit.
Once MBCC acquired possession of the vehicles, it took prompt
steps to sell them. Following MBCC's sale of the automobiles, a defi-
ciency of $62,125.59 remained on the two leases.
On August 29, 1996, Niblock sued MBCC in the Circuit Court for
Fairfax County, Virginia, alleging that MBCC had failed to correct
prior adverse credit reports to credit bureaus and thus violated the
terms of the January 31 settlement agreement. Based on diversity of
citizenship, MBCC removed the action to the United States District
Court for the Eastern District of Virginia, and filed a counterclaim
seeking a deficiency judgment against Niblock in the amount still
owing on his lease accounts with MBCC.
On January 3, 1997, the district court granted MBCC's motion for
summary judgment on all counts, ordered Niblock to pay the defi-
ciency to MBCC, and dismissed Niblock's claims. Niblock appeals
from that order.
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II.
Virginia contract law provides that "[t]he party who commits the
first breach of a contract is not entitled to enforce it, or to maintain
an action thereon, against the other party for his subsequent failure to
perform."* Spotsylvania Sch. Bd. v. Seaboard Surety Co., 415 S.E.2d
120, 127 (Va. 1992) (quoting Hurley v. Bennet , 176 S.E. 171, 175
(Va. 1934)). Only a material breach, however, precludes an action on
the contract by the breaching party. If the breach does not go to the
"root of the contract," then the "first breach" rule is inapplicable and
the breaching party may sue. Neely v. White, 14 S.E.2d 337, 340 (Va.
1941); see Horton v. Horton, 487 S.E.2d 200, 203 (Va. 1997)
(explaining that "[a]n exception to the [first breach] rule arises when
the breach did not go to the root of the contract but only to a minor
part of the consideration"). A "material breach is a failure to do some-
thing that is so fundamental to the contract that the failure to perform
that obligation defeats an essential purpose of the contract." Horton,
487 S.E.2d at 204 (citations omitted).
Niblock's failure to deliver the vehicles in accordance with the
terms of the settlement agreement clearly constitutes a material
breach. Niblock had only one obligation under the settlement agree-
ment: to deliver the two Mercedes to a designated dealership at a
specified time. Neither vehicle was delivered at the designated time.
Even if the late delivery was not a material breach because the con-
tract did not specify that time was of the essence, Niblock also failed
to deliver the S420V at the designated location. In flagrant disregard
of the provision identifying a Virginia dealership as the location for
delivery, Niblock elected to remain at a vacation home in Florida and
_________________________________________________________________
*A federal court exercising diversity jurisdiction must apply the law
of the state in which it sits, see Erie v. Tompkins, 304 U.S. 64, 78-79
(1938), including that state's choice of law rules, see Klaxon Co. v. Sten-
tor Elec. Mfg., 313 U.S. 487, 496 (1941). The district court resolved the
dispute pursuant to Virginia contract principles. Although it is not
entirely clear from the record on what basis the district court applied Vir-
ginia contract law, neither party has contested the district court's choice
of law. We therefore assume for purposes of appeal that Virginia contract
rules govern the present dispute. See Bilancia v. General Motors Corp.,
538 F.2d 621, 623 (4th Cir. 1976) (per curiam).
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surrender the S420V, five days past the second deadline, at a dealer-
ship more than 1,000 miles from the agreed location.
The record is devoid of any evidence that Niblock made even the
slightest attempt to comply with his obligations under the settlement
agreement. Because Niblock breached the contract, and the breach
was material, we hold that he is precluded under Virginia law from
suing on the contract unless, as he contends, MBCC waived the
breach.
To establish waiver, Niblock relies solely on MBCC counsel's let-
ter of February 6, 1996, in which counsel wrote:
[MBCC] remains committed to the settlement agreed to by
the parties . . . . Please direct Mr. Niblock to surrender the
1994 S420V identified in that letter agreement to H.B.L.,
Inc., [the independent dealership,] tomorrow. Failure to sur-
render the vehicle by tomorrow may result in the withdrawal
from that agreement by my client.
"Waiver is the voluntary intentional abandonment of a known legal
right, advantage or privilege. ``Both knowledge of the facts basic to
the exercise of the right and the intent to relinquish that right are
essential elements." Fox v. Deese, 362 S.E.2d 699, 707 (Va. 1987)
(quoting Employers Ins. Co. v. Great American , 200 S.E.2d 699, 707
(Va. 1973)). MBCC's letter does not demonstrate an intent to relin-
quish rights flowing from Niblock's breach of the settlement agree-
ment; to the contrary, counsel for MBCC expressly reserved the right
to withdraw from the agreement if Niblock failed to comply with his
contractual obligations. The letter merely indicates that MBCC was
willing to perform if Niblock delivered the S420V at the specified
time and place. There is no indication that MBCC intended to surren-
der a right to pursue a damage remedy for breach, or that MBCC
would forego its right to rescind the contract in the event Niblock
failed to deliver the S420V as agreed.
Furthermore, it is uncontroverted that Niblock in fact missed the
second return date and eventually surrendered the S420V far from the
agreed location. Therefore, even assuming that MBCC's letter consti-
tuted a waiver of rights flowing from the failure to deliver the two
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cars by the first deadline, Niblock's noncompliance with the modified
terms of the contract constituted a second, independent breach that
was not waived by MBCC.
Because Niblock's failure to comply with the delivery terms of the
settlement agreement constituted a material breach that was not
waived by MBCC, we hold that Niblock is precluded from suing
MBCC for an alleged breach of the same agreement.
III.
We have considered Niblock's defenses to liability for the deficien-
cies remaining on the two vehicle leases and conclude that they are
without merit.
It is undisputed that Niblock defaulted on the lease agreements by
withholding periodic lease payments. Niblock claims, however, that
MBCC first breached the automobile leases by failing to provide
Niblock with the documents needed to renew the vehicles' registra-
tions. Niblock identifies no language in either lease that requires
MBCC to provide such documents. Niblock argues, instead, that
MBCC's failure to provide the documents prevented him from main-
taining accurate certificates of title on the vehicles as required by the
contracts. As a result, he concludes, MBCC breached an implied duty
not to impede Niblock's performance of his contractual obligations.
Niblock conveniently disregards the terms of the lease agreements,
which expressly prohibited Niblock from withholding lease payments
"for any reason whatever." Moreover, Niblock began to withhold pay-
ments before the expiration of the vehicles' registrations. Niblock
withheld the rent payment for the S420V due August 29, 1995;
according to Niblock's own affidavit, however, the S420V was unli-
censed only after August 31, 1995. Similarly, Niblock withheld pay-
ment on the 500SL lease before the license plates on that vehicle
expired. Therefore, we hold that the district court properly rejected
Niblock's contention that MBCC was barred from recovery by the
alleged failure timely to deliver the documents required for registra-
tion.
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Finally, Niblock has claimed that a genuine issue of fact exists as
to whether Niblock was induced to enter the S420V lease by fraudu-
lent representations that the vehicle was new. Niblock argues that the
car was not new, but had been leased previously and repaired follow-
ing an accident.
The district court properly found that Niblock's affidavit contains
no competent, admissible evidence to support his claim. The affidavit
describes a discussion with a serviceperson in which Niblock was
advised that the S420V was not new when leased and that it had, in
fact, been damaged in an accident. The statements of the serviceper-
son are inadmissible hearsay. Fed. R. Evid. 801, 802. Niblock's
description of service records for the vehicle is inadmissible pursuant
to the best evidence rule. Fed. R. Evid. 1002. We conclude that no
genuine issue of material fact exists with respect to Niblock's liability
to MBCC for the deficiencies remaining on the vehicle leases.
CONCLUSION
Accordingly, the entry of summary judgment in favor of MBCC on
all claims is hereby
AFFIRMED.
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