Martin Marietta Materials, Inc. v. Driggs Corp. , 55 F. App'x 618 ( 2003 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
In Re: THE DRIGGS CORPORATION, 
Debtor.
MARTIN MARIETTA MATERIALS,
INCORPORATED,
Plaintiff-Appellant,
 No. 02-1028
v.
THE DRIGGS CORPORATION; OFFICIAL
COMMITTEE OF UNSECURED
CREDITOR OF THE DRIGGS
CORPORATION,
Defendants-Appellees.

Appeal from the United States District Court
for the District of Maryland, at Greenbelt.
Peter J. Messitte, District Judge.
(CA-01-2531-PJM, BK-01-1-541-PM)
Argued: October 30, 2002
Decided: January 3, 2003
Before WILKINSON, Chief Judge, GREGORY, Circuit Judge,
and Frank J. MAGILL, Senior Circuit Judge of the
United States Court of Appeals for the Eighth Circuit,
sitting by designation.
Affirmed by unpublished per curiam opinion.
2 IN RE: THE DRIGGS CORPORATION
COUNSEL
ARGUED: James Durling Fullerton, FULLERTON & WISE, Clif-
ton, Virginia, for Appellant. Bradley James Swallow, GORDON,
FEINBLATT, ROTHMAN, HOFFBERGER & HOLLANDER,
L.L.C., Baltimore, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
Martin Marietta Materials, Inc. ("Martin Marietta") appeals the dis-
trict court’s decision, affirming the bankruptcy court’s determination
that Driggs Corporation’s ("Driggs") failure to pay for some of its
stone requirements did not constitute a default under Driggs’ lease
with Martin Marietta. For the reasons that follow, we affirm.
I.
In March 1995, Martin Marietta and Driggs entered into a lease
agreement under which Driggs agreed to lease Martin Marietta’s
property and operate an asphalt plant on the same. The lease agree-
ment also contained a provision that required Driggs to purchase all
of its stone requirements from Martin Marietta. The lease stated, in
relevant part, that "Lessee shall purchase from Lessor all of Lessee’s
requirements for [stone] to be used in Lessee’s asphalt plant on the
lease premises . . . ." J.A. 39. The lease also provided that the
"[p]ayment for [stone] purchased by the Lessee from Lessor shall be
paid in accordance with the terms on the face of Lessor’s invoice to
Lessee . . . ." Id.
In January 2001, Driggs filed a Chapter 11 bankruptcy petition. As
part of its bankruptcy proceeding, Driggs assigned its lease with Mar-
IN RE: THE DRIGGS CORPORATION 3
tin Marietta to Bardon, Incorporated ("Bardon"). In response to
Driggs’ attempt to assign the lease to Bardon, Martin Marietta filed
a motion to establish cure amount, claiming that Driggs owed Martin
Marietta $77,423.29 for unpaid stone purchased under the terms of
their lease agreement. Martin Marietta argued that, pursuant to 11
U.S.C. § 365(b)(1)(A), Driggs was required to cure the amount owed
before it could properly assign the lease to Bardon.*
In July 2001, the bankruptcy court issued an opinion denying Mar-
tin Marietta’s motion. In its decision, the bankruptcy court reasoned
that Driggs did not default on the lease because payment for the stone
was governed by other agreements, namely, invoices, and was not,
therefore, a material term as required for purposes of establishing
default under the terms of the lease. Martin Marietta appealed to the
district court, which affirmed the ruling of the bankruptcy court. Mar-
tin Marietta timely filed this appeal.
II.
In bankruptcy cases, "we review the decision of the district court
de novo, effectively standing in its place to review directly the find-
ings of fact and conclusions of law made by the bankruptcy court."
Butler v. David Shaw, Inc., 72 F.3d 437, 440 (4th Cir. 1996). Accord-
ingly, we review the bankruptcy court’s findings of fact for clear error
and its conclusions of law de novo. In re Deutchman, 192 F.3d 457,
459 (4th Cir. 1999).
III.
Under 11 U.S.C. § 365(b)(1)(A), Driggs must cure any defaults
under the lease before it can properly assign the lease to Bardon. The
lease agreement defines a default as a failure "to comply with any
material terms or conditions of this agreement required to be done,
observed, kept, or performed by the other." J.A. 41. The lease also
*11 U.S.C. § 365(b)(1)(A) provides that "[i]f there has been a default
in an executory contract or unexpired lease of the debtor, the trustee may
not assume such contract or lease unless, at the time of assumption of
such contract or lease, the trustee cures, or provides adequate assurance
that the trustee will promptly cure, such default. . . ."
4 IN RE: THE DRIGGS CORPORATION
states that "all provisions of paragraph 8, Environmental Protection"
are material terms. Id. It is Martin Marietta’s contention, however,
that Driggs’ payment for the stone is also a material term of the lease,
thereby triggering the lease’s default provision. Because the lease
agreement is silent with regard to the materiality of payment for
stone, this Court must decide whether Driggs’ failure to pay for stone
constitutes a default under the terms of the lease agreement, requiring
Driggs to cure the amount owed to Martin Marietta pursuant to
§ 365(b)(1)(A).
It is undisputed that, in addition to the Environmental Protection
provisions of the lease, Driggs’ continuous operation of an asphalt
business on the leased site and its purchase of all its stone require-
ments from Martin Marietta are material conditions of the lease. It is,
however, Driggs’ purchase of the stone, not its payment for the stone,
that is the material condition of the lease that triggers the default pro-
vision. Payment for the stone, therefore, is governed by the terms of
the invoice.
Although the lease references commercially-defined price, quan-
tity, and delivery terms, the lease agreement explicitly requires Driggs
to pay for its stone requirements "in accordance with the terms shown
on the face of [Martin Marietta’s] invoice to Driggs." J.A. 39. Under
Maryland law, invoices are considered independent contractual agree-
ments that establish the essential and material terms for payment and
delivery. See, e.g., Cavalier Mobile Homes, Inc. v. Liberty Homes,
Inc., 53 Md. App. 379, 395 (1983). Because the invoices are separate
contractual obligations, the lease would have to contain a cross-
default provision that incorporates the terms of the invoices, in order
for a breach of Driggs’ contractual obligations under the terms of the
invoice to trigger the default provision of the lease. The lease agree-
ment, however, does not contain a cross-default provision. Thus,
Driggs’ failure to pay for the stone is merely a breach under the
invoice, and not a default under the lease.
Alternatively, Martin Marietta contends that the invoices and lease
agreement should be considered one, integrated, non-severable agree-
ment. An examination of the lease and invoices and relevant case law
leads this Court to a different conclusion.
IN RE: THE DRIGGS CORPORATION 5
Maryland law has not directly addressed the issue of when two or
more agreements should be considered one integrated contract. The
three-prong test set forth in In re Plitt Amusement Co., 233 B.R. 837(Bankr. C.D. Cal. 1999), however, is instructive on the issue. In Plitt,
the bankruptcy court utilized a three-part test to determine whether
two separate agreements constitute a single contract between parties:
(1) whether the nature and purpose of the obligations are different; (2)
whether the consideration for the obligations is separate and distinct;
and (3) whether the obligations of the parties are interrelated. 233
B.R. at 843.
Applying these factors to this case, we find that the invoices and
lease agreement are separate, independent contracts. First, the stated
purposes of the lease are to provide a site for Driggs to operate its
asphalt business and to grant Martin Marietta the exclusive right to
sell Driggs all of its stone requirements. J.A. 35. On the other hand,
the purpose of the invoices was to set forth the terms and conditions
applicable to the payment and delivery of stone. Second, the consider-
ation for the lease is distinct from the consideration required under the
terms of the invoices. Consistent with the purposes of the lease,
Driggs agreed not only to pay Martin Marietta $50,000.00 per year
for the use of Martin Marietta’s site but also agreed to purchase all
of its future stone requirements from Martin Marietta. J.A. 34-35. On
the other hand, under the invoices, the consideration was Driggs’
agreement to pay a stated price for stone Martin Marietta delivered to
Driggs. Third, the obligations of the parties under the lease are not
interrelated to those required under the terms of the invoices. As dis-
cussed above, under the terms of the lease, Martin Marietta was obli-
gated to provide Driggs with a site on which Driggs could operate its
asphalt business, and Driggs was required to pay rent and purchase
all of its future stone requirements from Martin Marietta. By contrast,
the invoices provided the payment and delivery terms for the stone
Driggs ordered from Martin Marietta. In short, because the obliga-
tions and consideration required of the parties under the lease are sep-
arate and distinct from those required by the invoices, the breach of
one does not relieve the parties of their obligations under the other.
IV.
It is evident from the express language of the lease agreement that
Driggs and Martin Marietta intended to have the lease contain obliga-
6 IN RE: THE DRIGGS CORPORATION
tions independent of those required under the terms of the invoices.
Indeed, this conclusion is mandated by the absence of a cross-default
provision in the lease. Accordingly, Driggs’ failure to pay for the
stone does not constitute a default under the lease agreement.
Therefore, we affirm the district court’s order affirming the deci-
sion of the bankruptcy court.
AFFIRMED