MCG, Inc. v. MGSJ Holdings, Inc. , 648 F. App'x 372 ( 2016 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 15-1547
MCG, INC.,
Plaintiff - Appellant,
v.
MGSJ HOLDINGS, INC.; MICHAEL MOORE; GARY WARD; STEVEN
MENDIETA,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. George L. Russell, III, District Judge.
(1:14-cv-03997-GLR)
Submitted: February 29, 2016 Decided: May 19, 2016
Before KING, DIAZ, and FLOYD, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Eric S. Lipsetts, ERIC LIPSETTS, P.A., Annapolis, Maryland, for
Appellant. Lars H. Liebeler, LARS LIEBELER, PC, Washington,
D.C., for Appellees.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
MCG, Inc. (MCG) appeals the district court’s order granting
judgment on the pleadings, or in the alternative, summary
judgment, in favor of MGSJ Holdings, Inc. (Holdings), Michael
Moore, Gary Ward, and Steven Mendieta (collectively, Defendants)
in this civil action arising out of an alleged breach of
contract. The district court held that MCG failed to fulfill a
condition precedent as required under the terms of an Investment
Agreement entered into by Mendieta, acting as the sole director
of MCG, and Moore and Ward, who signed as principals of
Holdings. The district court also held that Mendieta, Moore,
and Ward later cancelled the Investment Agreement, and MCG
ratified its cancellation, so there was no breach. We have
thoroughly reviewed the record and find that the district court
did not err in granting Defendants’ motion for judgment on the
pleadings, or, in the alternative, summary judgment.
Accordingly, we affirm the district court’s order for the
reasons set forth below.
I.
This court reviews “de novo a district court’s ruling on a
motion for judgment on the pleadings under Federal Rule of Civil
Procedure 12(c).” Drager v. PLIVA USA, Inc., 741 F.3d 470, 474
(4th Cir. 2014). A motion for judgment on the pleadings “should
only be granted if, after accepting all well-pleaded allegations
2
in the plaintiff’s complaint as true and drawing all reasonable
factual inferences from those facts in the plaintiff’s favor, it
appears certain that the plaintiff cannot prove any set of facts
in support of his claim entitling him to relief.” Edwards v.
City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999).
Similarly, this court reviews de novo the district court’s
grant of summary judgment. Spriggs v. Diamond Auto Glass, 242
F.3d 179, 183 (4th Cir. 2001). Summary judgment is appropriate
only in those cases where the pleadings, affidavits, and
responses to discovery “show that there is no genuine issue as
to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(c); see
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). A material
fact is one “that might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). A disputed fact presents a genuine issue “if the
evidence is such that a reasonable jury could return a verdict
for the nonmoving party.” Id.
II.
In this case, the district court pronounced its findings
through a bench ruling during a hearing on Defendants’ motion
for judgment on the pleadings, or, in the alternative, summary
judgment. The district court found that Mendieta, as director
of MCG, had “sole authority to contract, to bargain, [and] to
3
negotiate with individual entities.” As the sole director,
Mendieta entered into an Investment Agreement with Ward and
Moore, and MCG failed to perform a condition precedent –
establishing bank accounts with two specific signers – as
required in that contract. And “the failure of MCG to fulfill
the terms of the agreement . . . prevented the formation of a
contract. Because the ultimate basis for the contract was the
disbursement of the loan funds.” The district court therefore
concluded, “the condition precedent was not fulfilled,
regardless of the circumstances of its fulfillment,” and
Holdings, Ward, Moore, and Mendieta did not breach the contract.
The district court also addressed an additional argument
“that the ratification of the agreement compelled Holdings to
perform under the contract.” Again, the district court
concluded that a contract did not exist because MCG did not
fulfill the condition precedent. The court alternatively
concluded that the Investment Agreement was a contract that,
once ratified, was impossible to perform because Mendieta had
resigned from MCG.
On appeal, MCG argues the district court erred for several
reasons when it dismissed the complaint and granted Defendants’
motion. MCG further argues the trial court improperly dismissed
its tort claims against Mendieta. Defendants argue that the
4
“principle reason MCG’s claims fail is that MCG did not meet the
condition precedent set forth” in the Investment Agreement.
In Maryland, * the interpretation of a contract is a question
of law, and courts interpret contracts objectively. Nova
Research, Inc. v. Penske Truck Leasing Co., 952 A.2d 275, 283
(Md. 2008). Contract interpretation therefore begins with the
plain meaning of the contractual terms. Storetrax.com, Inc. v.
Gurland, 895 A.2d 355, 367 (Md. Ct. Spec. App. 2006), aff’d, 915
A.2d 991 (Md. 2007). Additionally, “[t]o prevail in an action
for breach of contract, a plaintiff must prove that the
defendant owed the plaintiff a contractual obligation and that
the defendant breached that obligation.” Taylor v. NationsBank,
N.A., 776 A.2d 645, 651 (Md. 2001).
Here, the duty owed between MCG and Defendants, like most
contract cases, rests on the terms of the contract. In this
case, the duties owed are set forth in the Investment Agreement.
Among other things, the Investment Agreement included a
provision that stated: “As a condition of Investor providing
two loans, MCG bank accounts [shall] bear two signers only,
Steve Mendieta and, as a backup, Jeff Wray.” The district court
*The parties do not dispute that Maryland law controls the
Investment Agreement.
5
relied on this provision when it determined that MCG failed to
fulfill a condition precedent.
A condition precedent has been defined as a fact, other
than mere lapse of time, which, unless excused, must exist or
occur before a duty of immediate performance of a promise
arises. Chirichella v. Erwin, 310 A.2d 555, 557 (Md. 1973).
“Generally, when a condition precedent is unsatisfied, the
corresponding contractual duty of the party whose performance
was conditioned on it does not arise.” Chesapeake Bank of Md.
v. Monro Muffler/Brake, Inc., 891 A.2d 384, 391-92 (Md. Ct.
Spec. App. 2006) (internal quotation and citation omitted); see
also Laurel Race Course, Inc. v. Regal Const. Co., 333 A.2d 319,
327 (Md. 1975) (“It is fundamental that where a contractual duty
is subject to a condition precedent, whether express or implied,
there is no duty of performance and there can be no breach by
nonperformance until the condition precedent is either performed
or excused.”) (citations omitted).
Because the Investment Agreement required MCG to establish
the bank accounts “as a condition” of the loan, Holdings, Ward,
and Moore were not obligated to make loans to MCG before such
bank accounts were established. Mendieta, Ward, and Moore then
decided to withdraw from investing in MCG, or cancel the
contract. The district court, therefore, did not err when it
6
concluded that MCG failed to fulfill a condition precedent found
in the Investment Agreement.
The district court also did not err when it held that
Mendieta, Ward, and Moore cancelled the Investment Agreement,
and MCG could not revive the contract after Mendieta resigned
from MCG and MCG appointed new directors. “At common law the
parties to a written contract have the right to rescind it by
mutual consent, even though there is no provision in the
contract permitting them to do so.” Maslow v. Vanguri, 896 A.2d
408, 424 (Md. Ct. Spec. App. 2006) (internal quotation and
citation omitted). “The parties to a contract may, either in
writing or orally, release themselves from its obligations.”
Id. (citations omitted); see also Lemlich v. Bd. of Trs. of
Harford Cmty. Coll., 385 A.2d 1185, 1189-90 (Md. 1978)
(discussing how a contract may be rescinded through mutual
agreement of the parties). “It has frequently been held that
the mutual assent requisite to rescind a contract need not be
express; it may be inferred from the conduct of the parties in
the light of the surrounding circumstances.” Maslow, 896 A.2d
at 425 (internal quotation and citation omitted).
Here, the record shows Ward and Moore, along with Mendieta,
acting as the sole director of MCG, decided to abandon, or
rescind, the Investment Agreement. Mendieta notified the future
officers of MCG in writing about their decision to walk away
7
from the deal, and Mendieta then resigned from MCG. MCG cannot
compel Holdings to perform under the Investment Agreement after
the parties agreed to cancel it.
Additionally, the district court did not err when it
dismissed the tort claims against Mendieta. Although MCG relies
on Shapiro v. Greenfield, 764 A.2d 270, 278 (Md. Ct. Spec. App.
2000), to assert that the district court applied the wrong
standard, that case analyzes the corporate opportunity doctrine.
In contrast, this is a breach of contract case that turns on the
fulfillment of a condition precedent, and the cancellation or
rescission of the Investment Agreement. Mendieta did not usurp
a corporate opportunity when he simply ended the Investment
Agreement and resigned from MCG. As a result, the district
court did not need to decide whether Mendieta’s departure was
fair and reasonable to the corporation.
MCG’s Articles of Incorporation vested Mendieta with
authority as the sole director. As sole director, Mendieta
could negotiate and contract on MCG’s behalf. Mendieta could
also end business dealings on MCG’s behalf, as happened here.
See Dialist Co. v. Pulford, 399 A.2d 1374, 1378 n.3 (Md. Ct.
Spec. App. 1979) (explaining the nature of a rescission). As a
result, the district court did not err when it granted
Defendants’ motion for judgment on the pleadings, or, in the
alternative, summary judgment.
8
Accordingly, the order of the district court is affirmed.
We dispense with oral argument because the facts and legal
contentions are adequately presented in the materials before
this court and argument would not aid the decisional process.
AFFIRMED
9