Essential Housing v. Landev Investments ( 1999 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ESSENTIAL HOUSING DEVELOPMENT,
INCORPORATED,
Plaintiff-Appellant,
No. 98-1563
v.
LANDEV INVESTMENTS, INCORPORATED,
Defendant-Appellee.
Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
Malcolm J. Howard, District Judge.
(CA-95-461-5-H)
Argued: September 24, 1999
Decided: December 13, 1999
Before WILKINSON, Chief Judge, WILLIAMS, Circuit Judge, and
HAMILTON, Senior Circuit Judge.
_________________________________________________________________
Vacated and remanded for further proceedings by unpublished per
curiam opinion.
_________________________________________________________________
COUNSEL
ARGUED: B. Gordon Watkins, III, KILPATRICK STOCKTON,
L.L.P., Winston-Salem, North Carolina, for Appellant. James A. Mer-
ritt, Jr., BERRY, ADAMS, QUACKENBUSH & STUART, P.A.,
Columbia, South Carolina, for Appellee.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
The issue presented in this appeal is whether a letter signed by
appellee, Landev Investments, Inc. (Landev), was signed before
Landev entered into a consulting agreement with appellant, Essential
Housing Development, Inc. (EHD), and therefore, merged into the
consulting agreement by integration, or whether the letter was signed
after Landev entered into the consulting agreement with EHD, and
therefore, modified the consulting agreement. The district court
granted Landev's motion for summary judgment, concluding that the
letter was signed by Landev before Landev entered into the consulting
agreement with EHD, and therefore, merged into the consulting
agreement by integration. EHD now appeals. Because a genuine issue
of material fact exists concerning when the letter was signed by
Landev, we vacate the district court's judgment and remand for fur-
ther proceedings consistent with this opinion.
I
EHD is a North Carolina corporation that develops and manages
low and moderate income housing. Landev is a South Carolina corpo-
ration, owned and controlled by Thomas Walker (Walker), that pro-
vides consulting services. In 1993, Walker and EHD executed a series
of contracts relating to the transfer of, inter alia, management rights
in twenty housing projects in South Carolina.1 As part of these trans-
actions, EHD executed a consulting agreement (the Consulting
_________________________________________________________________
1 The negotiations were conducted between Walker and MBG Manage-
ment, Inc. (MBG Management), the predecessor of Essential Housing
Management, Inc. (EH Management). EH Management is a sister com-
pany of EHD, but for purposes of this appeal, EHD, EH Management,
and MBG Management represent the same interests and will be referred
to collectively as EHD.
2
Agreement or the Agreement) with Landev.2 According to the terms
of the Consulting Agreement, EHD was to pay Landev $3,185 per
month from March 1993 through February 1998. In exchange,
Landev agreed "to be available to provide consulting services, and to
consult with and advise [EHD] as requested, in regard to the manage-
ment and development of apartment projects." (Corrected Supplemen-
tal Appendix at 4).
The Consulting Agreement was reduced to writing and signed on
February 8, 1993. In addition to containing the substantive terms of
the contract, the Agreement also contained, inter alia, an integration
clause, a clause allowing for amendment of the Agreement, and a
governing law clause.3 The integration clause stated: "This Agreement
supersedes any and all prior negotiations, contracts, documents and/or
understandings, written or oral, between the parties concerning the
provision of consulting services by the Consultant." (Corrected Sup-
plemental App. at 6). The clause allowing for amendments to the
Agreement stated: "The parties consent and agree that the terms and
conditions of this Agreement may be renegotiated . .. by the mutual
consent of all parties hereto. Any such renegotiation or amendment
shall be in writing and signed by all parties hereto." Id. Finally, the
governing law clause stated: "This Agreement shall be governed by
the laws of the State of South Carolina." Id.
The Consulting Agreement was signed by Gordon Blackwell
(Blackwell), EHD's chief of operations, David Weil, an officer of
EHD, and Thomas Walker, representing Landev. At some point in
time in close proximity to the date the Agreement was signed, Walker
signed a renegotiation letter (the Renegotiation Letter or the Letter),
titled "Renegotiation of Consulting Agreement."4 The Renegotiation
_________________________________________________________________
2 Although the 1993 transactions encompassed more than just the Con-
sulting Agreement, at this time, the parties have not raised challenges
beyond the scope of the Agreement or its alleged amendment. Accord-
ingly, our recitation of the facts and procedural history will focus on the
creation and alleged modification of the Agreement.
3 Integration clauses are also referred to as merger clauses. See Black's
Law Dictionary 812 (7th ed. 1999).
4 The Renegotiation Letter was drafted by Blackwell on behalf of EHD
but Walker was its sole signer.
3
Letter has a typed date on it of February 4, 1993, but it states: "This
letter will confirm our understanding as to the Consulting Agreement
between [EHD] and Landev Investments, Inc., which Agreement is
dated February 8, 1993." (J.A. at 23). The date of "February 8, 1993"
is handwritten. The Renegotiation Letter sets forth a number of clari-
fications and modifications to the Consulting Agreement. The one
modification of import to this appeal allowed EHD to offset the fees
it was required to pay to Landev should EHD cease to manage any
of the twenty projects.
Neither party disputes that the Renegotiation Letter was signed by
Landev. Landev, however, claims that the Renegotiation Letter was
signed on the date reflected on the document, February 4, 1993, and
thus, is inadmissible because it was merged into the Consulting
Agreement. In contrast, EHD claims that the document was signed
after the February 8, 1993 Consulting Agreement was signed, and
thus, was a modification of the Agreement.
From March 1993 through December 1994, EHD made the pay-
ments that were due Landev under the Agreement. At the beginning
of 1995, however, the partners who owned the housing projects being
managed by EHD, one of whom was Walker, failed to pay certain dis-
puted charges. Bud Clark, the president of EHD, wrote a memoran-
dum to Walker and his partner, Arthur Sandman, in which he stated
that EHD would cease managing six of the properties if the partners
did not pay the money they owed. Acting on behalf of the partners,
Sandman terminated EHD as manager of all twenty projects. EHD
ceased managing six of the projects on May 31, 1995; it ceased man-
aging thirteen more projects on June 30, 1995; and it ceased manag-
ing the final project on August 31, 1995.
After the partners terminated EHD as manager of all twenty proj-
ects, EHD brought suit against Landev in the United States District
Court for the Eastern District of North Carolina on May 24, 1995.
EHD sought a declaratory judgment that, because of the Renegotia-
tion Letter, it was not obligated to pay Landev the remaining fees that
it had agreed to pay under the Consulting Agreement.
Initially, on July 17, 1995, Landev filed a motion to dismiss for
lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal
4
Rules of Civil Procedure. The district court granted Landev's motion
to dismiss on October 19, 1995. On appeal, this court, finding that
Landev had sufficient contacts with North Carolina for the district
court to exert personal jurisdiction over it, reversed the district court's
judgment and remanded the case for further proceedings. See
Essential Hous. Dev., Inc. v. Landev Invs., Inc., No. 95-3105, 1996
WL 453463 (4th Cir. Aug. 13, 1996).
On remand, Landev answered EHD's complaint and filed a coun-
terclaim alleging that it was entitled to receive the additional pay-
ments. The parties engaged in discovery and then filed cross-motions
for summary judgment. EHD asserted that the Renegotiation Letter
modified the Consulting Agreement, and therefore, it no longer owed
Landev any more fees because it had stopped managing all twenty
projects. Landev argued that because the Renegotiation Letter was
signed before the Consulting Agreement was executed, the Renegoti-
ation Letter merged into the Consulting Agreement. Therefore,
Landev argued, the integration clause in the Consulting Agreement
nullified the Renegotiation Letter. On January 3, 1998, the district
court denied EHD's motion and granted Landev's motion in part.
The district court found that "[u]nder South Carolina law, a merger
clause such as the one embodied in the consulting agreement at issue
in this case expresses the intention of the parties to treat the writing
as a complete integration of their agreement." (J.A. at 306-07). The
district court acknowledged that the parties subsequently could mod-
ify a completely integrated agreement. According to the district court,
however, the parties could not attempt to change the Consulting
Agreement by the admission of "parol evidence of prior or contempo-
raneous agreements not included in the original writing. Because the
February 4, 1993 letter from Walker preceded the completely inte-
grated February 8, 1993, consulting agreement, the court may not
properly consider Walker's letter as modifying the terms of the Febru-
ary 8 agreement." Id. at 307.
Focusing solely on the February 4, 1993 date typed on the Renego-
tiation Letter, the district court held that "[a]s a matter of law, the par-
ties could not have renegotiated the completely integrated agreement
before it became final." (J.A. at 307). Based on these findings, the dis-
trict court granted partial summary judgment to Landev concluding
5
that Landev was entitled to $114,660, the fees from the Consulting
Agreement from March 1995 to February 1998 (thirty-six months at
$3,185 a month).5
EHD filed a motion for reconsideration on January 13, 1998, and
Landev moved for an award of attorney's fees on January 26, 1998.
On March 6, 1998, the district court entered judgment in favor of
Landev in the amount of $177,885.21, which included $114,660 for
the unpaid fees and $63,225.21 for attorney's fees. 6 On April 6, 1998,
EHD filed its notice of appeal.
II
This court reviews a district court's grant of summary judgment de
novo. See Jakubiak v. Perry, 101 F.3d 23, 26 (4th Cir. 1997). Sum-
mary judgment should only be granted if a party's submissions to the
court "show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law."
Fed. R. Civ. P. 56(c). "In deciding whether facts are in dispute, the
evidence of the non-moving party is to be believed and all justifiable
inferences must be drawn in his favor." Jakubiak, 101 F.3d at 26 (cit-
ing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)). The
party moving for summary judgment has the burden of demonstrating
that the Rule 56(c) test is satisfied and that there is no genuine issue
as to any material fact. See Catawba Indian Tribe v. South Carolina,
978 F.2d 1334, 1339 (4th Cir. 1992).
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5 It is undisputed that EHD paid Landev the required fees through
December 1994. It is also undisputed that EHD did not pay Landev any
fees after February 1995. The parties, however, do dispute whether EHD
paid the fees for January and February 1995, months in which EHD still
managed all the properties. EHD contends that it made payments for Jan-
uary and February 1995, whereas Landev claims that EHD stopped pay-
ing the fees in December 1994. On this issue, the district court held that
summary judgment was not appropriate because a genuine issue of mate-
rial fact existed. Landev later withdrew that part of its claim in light of
the district court's grant of summary judgment.
6 The Consulting Agreement contained a clause requiring the defaulting
or breaching party to pay "all costs, including reasonable attorney's fees,
incurred by the aggrieved party in prosecuting said default or breach."
(Corrected Supplemental App. at 6).
6
A
EHD asserts that the district court erred in finding that no genuine
issue of material fact existed as to whether the Renegotiation Letter
modified the Consulting Agreement. EHD points to the fact that,
although the Renegotiation Letter was dated February 4, 1993, the
Letter itself references the later-dated Consulting Agreement. In addi-
tion, EHD notes that Blackwell testified that the Renegotiation Letter
was signed at a later date and that it modified the Consulting Agree-
ment. Therefore, based on this evidence, the district court could not
have found that no genuine issue of material fact existed.
Landev claims that the Renegotiation Letter is invalid as a matter
of law because the Letter, having been dated/signed on February 4,
1993, preceded the February 8, 1993 Consulting Agreement, and thus,
was merged into the Agreement. "Here the very terms of the Letter
reveal that it predated the Agreement and, hence, was never intended
to amend the Agreement at issue in this appeal as the Agreement had
a merger clause." (Appellee's Br. at 8). Asserting that the Letter and
the Agreement are unambiguous, Landev claims that, under the parol
evidence rule, the district court properly refused to allow Blackwell's
testimony to contradict the terms of the Letter.
"The parol evidence rule prevents the introduction of extrinsic evi-
dence of agreements or understandings contemporaneous with or
prior to execution of a written instrument when the extrinsic evidence
is to be used to contradict, vary, or explain the written instrument."
Gilliland v. Elmwood Properties, 391 S.E.2d 577, 581 (S.C. 1990).
The parol evidence rule applies especially "when the written instru-
ment contains a merger or integration clause." Id. Thus, where an
agreement contains an integration clause expressing a clear intent that
it supersedes all prior agreements, that clause will integrate any prior
agreements into the final contract. See Edward Pinckney Assocs., Ltd.
v. Carver, 364 S.E.2d 473, 475 (S.C. Ct. App. 1987). "It is well set-
tled, however, that [the parol evidence] rule does not apply to subse-
quent modifications of the agreement. An integrated agreement may
always be modified." Wilson v. Landstrom, 315 S.E.2d 130, 134 (S.C.
Ct. App. 1984) (citations omitted).
Whether a contract is integrated, and therefore, whether evidence
of prior or contemporaneous agreements is inadmissible, is a determi-
7
nation of law to be resolved by the district court. See John D. Cala-
mari & Joseph M. Perillo, Contracts § 3-2, at 139-40 (3d ed. 1987)
(noting that whether a contract was integrated was a question of intent
and that "under the parol evidence rule the question of intent, whether
actual or presumed, is ordinarily decided by the trial judge as a ques-
tion of law"). Whether the parties entered into a modification after
they signed an integrated contract is the equivalent of determining
whether the parties have entered into a subsequent contract which is
a question of fact that should be left to the jury unless no reasonable
juror could find that a modification existed. See Prestwick Golf Club,
Inc. v. Prestwick Ltd. Partnership, 503 S.E.2d 184, 186 (S.C. Ct. App.
1998) ("[I]f the evidence supports the existence of a contract, the
issue should be submitted to a jury."); see also Columbia Hyundai v.
Carll Hyundai, Inc., 484 S.E.2d 468, 469-70 (S.C. 1997) (holding that
"the matter of the existence of a contract was properly submitted to
the jury").
Because neither party disputes that the Consulting Agreement is an
integrated contract or that if the Renegotiation Letter was signed after
the Agreement, and met the other requirements of a contract, it modi-
fies the Consulting Agreement, the dispositive issue before the district
court was whether the Renegotiation Letter was signed before or after
the Consulting Agreement. If the Renegotiation Letter was signed
before the February 8, 1993 Consulting Agreement, then the Letter
was merged into the Agreement by the integration clause. If it was
signed after the Consulting Agreement, then the Renegotiation Letter
is a modification of the Agreement.
To determine when the Renegotiation Letter was signed the parties
submitted the following evidence: (1) the Renegotiation Letter, which
contained a typed date of February 4, 1993, but which references and
purports to modify the February 8, 1993 Consulting Agreement; (2)
the deposition testimony of Blackwell that states, without qualifica-
tion, that the Consulting Agreement was signed prior to the Renegoti-
ation Letter; (3) the deposition testimony of Walker, in which he
initially is uncertain as to whether the Renegotiation Letter modified
the Consulting Agreement but later denies such a modification in an
errata to his deposition; and (4) the affidavit of Walker, in which he
claims that the "Letter of February 4, 1993 that EH claims modifies
8
the Agreement was signed before the final understanding as to the
terms of the Agreement was reached," (J.A. at 242).
The evidence submitted is not conclusive as to the issue of when
the Letter was signed. Landev asserts that the February 4, 1993 date
is an unambiguous term, and therefore, the district court "properly
refused to allow Blackwell's testimony (which was ambiguous) to
contradict the terms of the Letter." (Appellee's Br. at 8). Landev's
assertion and the district court's conclusion ignore the powerful
evidence--Blackwell's testimony and the language of the Letter--
that contradicts a finding that the Letter was signed on February 4,
1993.
The Renegotiation Letter's date is internally inconsistent with its
title--"Renegotiation of Consulting Agreement"--and its text. The
Letter indicates that a consulting agreement was in existence, and had
been signed, prior to the Letter. The Renegotiation Letter states: "As
we have discussed, and as I have agreed, the Consulting Agreement
shall be renegotiated under the following circumstances." (J.A. at 23).
The term "renegotiation" also raises an inference that Landev and
EHD had already entered into some sort of agreement. Walker
acknowledges that he signed the Renegotiation Letter, but claims that
the Letter "was never meant to be part of the agreement as finally
established." (J.A. at 242). Why anyone would sign a letter purporting
to be a renegotiation of a consulting agreement prior to entering into
the consulting agreement itself is not explained. Nor has any evidence
been submitted that shows that Walker had signed an earlier consult-
ing agreement.
These inconsistencies alone would appear sufficient to raise a gen-
uine issue of material fact. Viewed in conjunction with Blackwell's
unequivocal statement that the Consulting Agreement was signed
prior to the Renegotiation Letter, one would be hard pressed to find
that no genuine issue of material fact exists. In arriving at its conclu-
sion, it is clear that the district court looked at nothing more than the
February 4, 1993 date indicated on the Renegotiation Letter. The date,
however, which the district court appropriately notes "is unambiguous
and prominently centered as the first line of its text," read in conjunc-
tion with the main body of the Letter renders the entire document
ambiguous as to the date it was actually signed.
9
B
Landev argues that, even if a genuine issue of material fact exists
as to whether the Renegotiation Letter was signed after the Consulting
Agreement, we can affirm the district court's grant of summary judg-
ment in its favor based on several alternative theories. We disagree.
First, Landev argues that the Renegotiation Letter cannot constitute
a valid modification because it was signed by only one party, and
therefore, did not conform with the amendment clause of the Consult-
ing Agreement. This argument, however, is unpersuasive under South
Carolina law. South Carolina law provides that a"written contract
may be modified by oral agreement even if the contract expressly
states that all changes must be in writing." Koontz v. Thomas, 511
S.E.2d 407, 411 (S.C. Ct. App. 1999); cf. Freeman v. Stanbern Const.
Co., 106 A.2d 50, 54 (Md. 1954) ("The rule has been accepted by the
Courts, both State and Federal, that, even though a written contract
stipulates that it may not be varied except by an agreement in writing,
nevertheless the parties, by a subsequent oral agreement, may modify
it by mutual consent."); 17A Am. Jur. 2d Contracts § 526 (1991) (cit-
ing cases). The rationale behind this rule is that once a contract exists,
the parties are free to modify the contract "in any manner they choose,
notwithstanding, agreement prohibiting its alteration except in a par-
ticular manner." Evatt v. Campbell, 106 S.E.2d 447, 450 (S.C. 1959)
(quoting Mebane v. Taylor, 162 S.E. 65, 67 (1932)); see also Fisher
v. Tiffin, 551 P.2d 1061, 1063 (Or. 1976) ("``Parties to a contract can
not [sic], even by an express provision in that contract, deprive them-
selves of the power to alter or vary or discharge it by subsequent
agreement.'" (quoting 3A Corbin on Contracts § 763, at 531 (1960)));
17A Am. Jur. 2d Contracts § 520 (1991) (citing cases). Therefore,
because a "written contract is valid [under South Carolina law] if one
party signs it and the other acquiesces," Bishop Realty, 355 S.E.2d at
300, assuming the other requirements of a valid contract were met,
the Renegotiation Letter was a valid modification.
Second, Landev asserts that the statute of frauds required both par-
ties to sign the Renegotiation Letter for it to be a valid modification.
The South Carolina statute of frauds, however, only requires that an
agreement "or some memorandum or note thereof shall be in writing
and signed by the party to be charged therewith ." S.C. Code Ann.
10
§ 32-3-10 (Law. Co-op. 1991) (emphasis added). The Renegotiation
Letter is a writing that was signed by Landev, and thus, it satisfies the
statute of frauds. See Smith v. McClam, 346 S.E.2d 720, 723 (S.C.
1986) (holding that a letter "prepared by a party to a contract . . . may
constitute a memorandum sufficient to satisfy the statute of frauds
although it is not delivered to the other contracting party and was nei-
ther intended for nor known to him").
Finally, Landev argues that the Renegotiation Letter was invalid
because it was not supported by consideration. The district court,
however, never addressed the consideration issue because it held that
the Renegotiation Letter was merged into the Consulting Agreement,
and therefore, inadmissible. Whether the Renegotiation Letter was
supported by adequate consideration is a fact intensive inquiry that is
better left to the district court on remand. Accordingly, this final argu-
ment does not provide a basis for upholding the district court's grant
of summary judgment in favor of Landev.
III
In viewing the record and all reasonable inferences drawn from it
in a light most favorable to EHD, a reasonable juror could find that
the Renegotiation Letter was in fact signed after the Consulting
Agreement. Such a factual determination would entitle EHD to offset
the amount of fees it owes to Landev. Thus, a genuine issue of mate-
rial fact existed and the district court erred in awarding summary
judgment to Landev. Accordingly, we vacate the district court's judg-
ment and remand for further proceedings consistent with this opinion.
VACATED AND REMANDED FOR
FURTHER PROCEEDINGS
11