Collins Holding Corp. v. Wausau Underwriters Insurance ( 2006 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1448
COLLINS HOLDING CORPORATION; COLLINS
PROPERTIES, LP,
Plaintiffs - Appellants,
versus
WAUSAU UNDERWRITERS INSURANCE COMPANY; LMG
PROPERTY,
Defendants - Appellees.
Appeal from the United States District Court for the District of
South Carolina, at Greenville. Henry M. Herlong, Jr., District
Judge. (CA-03-3552-6-HMH)
Argued: September 20, 2006 Decided: November 3, 2006
Before MOTZ and GREGORY, Circuit Judges, and Richard L. VOORHEES,
United States District Judge for the Western District of North
Carolina, sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: Charles Elford Carpenter, Jr., RICHARDSON, PLOWDEN,
CARPENTER & ROBINSON, Columbia, South Carolina, for Appellants.
James William Logan, Jr., LOGAN, JOLLY & SMITH, L.L.P., Anderson,
South Carolina, for Appellees. ON BRIEF: Carmen V. Ganjehsani,
RICHARDSON, PLOWDEN, CARPENTER & ROBINSON, Columbia, South
Carolina, for Appellants.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
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PER CURIAM:
In this diversity contract case, Collins Holding Corporation
(“Collins”), a commercial real estate company, sues Wausau
Underwriters Insurance Company (“Wausau”), which insured a property
owned by Collins that was destroyed by fire. Collins alleges that
Wausau anticipatorily breached the insurance policy by imposing a
deadline for Collins to rebuild, and then refusing to pay the
replacement value of the property when Collins failed to meet the
deadline. Further, Collins asserts that Wausau’s conduct in the
negotiations breached an implied covenant of good faith and fair
dealing. After Collins presented its case to a jury, the district
court granted Wausau’s motion for a judgment as a matter of law on
both claims. Collins appeals; we affirm.
I.
Wausau insured several properties owned by Collins against
fire damage, including the property at issue here, a building at
3505 Augusta Road in Greenville, South Carolina (the “3505
Property”). On or about August 13, 2000 a fire destroyed the 3505
Property, which the parties concede was covered by Wausau’s policy.
The policy gave Collins the option to claim the actual cash
value of the damage, or the cost of replacing the damaged property
with a building of like size and construction. The dispute here
concerns the parties’ negotiations over the replacement cost. The
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relevant portion of the policy states that Wausau “will not pay on
a replacement cost basis for any loss or damage: (1) Until the lost
or damaged property is actually repaired or replaced; and (2)
Unless the repairs or replacement are made as soon as reasonably
possible after the loss or damage” (emphasis added).
Collins wanted to rebuild the property. But Collins insisted
upon reaching an agreement with Wausau over coverage prior to the
rebuilding, instead of seeking the replacement cost after the
rebuilding, as provided by the terms of the policy. Collins owned
another building that had burned, the “7150 Property,” which Wausau
also insured under a policy with the same terms, and the parties
had agreed about replacement cost prior to rebuilding that
property.
Beginning in September 2000, the parties negotiated over the
cost of rebuilding the 3505 Property. In a letter dated January
15, 2001, Wausau offered to pay Collins an actual cash value
settlement of $296,455.56 or a replacement cost settlement of
$409,778.09. Collins did not accept the offer. The parties
continued to disagree on the replacement cost. On April 22, 2002,
Wausau reiterated its January 15, 2001 offer and informed Collins
that it must complete the repairs and make a claim for the
replacement cost by February 6, 2003. Noting that “[t]wenty [20]
months have passed since the date of loss,” Wausau told Collins
that missing the February 6, 2003 deadline would lead to a
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“forfeiture of the replacement cost benefit.” On July 18, 2002,
Wausau paid Collins the actual cash value of the property --
$295,455.56 -- which Collins accepted. However, Collins continued
to negotiate with Wausau as to replacement cost through the
February 2003 deadline. On February 18, 2003, Wausau informed
Collins that because it had failed to rebuild prior to the February
6 deadline, Wausau would “suspend all further adjustment activity
and close our file.”
Collins filed suit against Wausau in South Carolina state
court; Wausau removed the case to federal court. After Collins
presented its evidence to the jury, Wausau moved for a judgment as
a matter of law, which the district court granted.
We review the judgment as a matter of law, or directed
verdict, de novo. Gairola v. Va. Dep’t of Gen. Servs., 753 F.2d
1281, 1285 (4th Cir. 1985). “The standard for granting a directed
verdict requires a court to view the evidence in the light most
favorable to the non-moving party and draw every legitimate
inference in favor of that party; having treated the adjudicatory
facts in this fashion, the court must determine whether a
reasonable trier of fact could draw only one conclusion from the
evidence.” Hofherr v. Dart Indus., Inc., 853 F.2d 259, 261-62 (4th
Cir. 1988) (internal quotation marks omitted).
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II.
Collins first claims that it presented sufficient evidence
from which a reasonable jury could have found that Wausau
anticipatorily breached the insurance contract, by refusing to pay
any replacement cost at any time, regardless of whether Collins
replaced the 3505 Property.
A.
Where adopted, the anticipatory breach doctrine excuses the
nonbreaching party from contractual conditions precedent. See,
e.g., Studio Frames LTD v. Standard Fire Insurance Co., 369 F.3d
376, 381 (4th Cir. 2004) (citing Restatement (Second) of Contracts
(“Restatement”) § 253(2) & cmt. b; and 23 Samuel Williston &
Richard A. Lord, A Treatise on the Law of Contracts (“Williston”)
§ 39:38 (4th ed. 2002)). South Carolina law governs this diversity
case, and that state long ago adopted the doctrine of anticipatory
breach. See Payne v. Melton, 45 S.E. 154 (S.C. 1903); 30 S.C. Jur.
Contracts § 66; Keith A. Rowley, A Brief History of Anticipatory
Repudiation in American Contract Law, 69 U. Cin. L. Rev. 565, 599
(2001). Thus in this case, proof of Wassau’s anticipatory breach
would excuse Collins from the contractual condition precedent of
rebuilding before being paid the replacement cost.
Although South Carolina has adopted the anticipatory breach
doctrine, state law on the subject is sparse. South Carolina,
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however, has consistently looked to traditional sources in its
development of other areas of contracts law. See, e.g., Holler v.
Holler, 612 S.E.2d 469, 475-76 (S.C. 2005); White v. J.M. Brown
Amusement Co., Inc., 601 S.E.2d 342, 345 (S.C. 2004); Boddie-Noell
Props., Inc. v. 42 Magnolia P’ship, 574 S.E.2d 726,729-30 (S.C.
2002); Munoz v. Green Tree Fin. Corp., 542 S.E.2d 360, 365 n.7
(S.C. 2001). Accordingly, the common law -- including the case law
developed in this circuit, e.g., Studio Frames, 369 F.3d 376; City
of Fairfax v. Wash. Met. Area Transit Auth., 582 F.2d 1321 (4th
Cir. 1978) -- and standard treatises and authorities, e.g.,
Restatement § 253; 23 Williston § 63:42, at 609, § 63:45 at 618; 9
Arthur Linton Corbin, Corbin on Contracts (“Corbin”) § 973, at 801
(interim ed. 2002); 17B C.J.S. Contracts (“C.J.S.”) § 536, at 199,
assist us here in determining what proof a South Carolina court
would require of a party seeking to establish anticipatory breach.
No single authority presents, as a comprehensive enumerated
list, the standards for finding an anticipatory breach. But taken
together, the relevant sources offer the following guidelines for
defining an anticipatory breach: (1) the repudiation must be
unequivocal, Studio Frames, 369 F.3d at 383; Fairfax, 582 F.2d at
1326; 23 Williston § 63:45, at 620; 9 Corbin § 973, at 801-02; 17B
C.J.S. § 536, at 199; (2) the repudiation must be a “final and
absolute declaration that the contract must be regarded as
altogether off,” Fairfax, 582 F.2d at 1326-27 (internal quotation
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marks omitted); 17B C.J.S. § 536, at 199; (3) the repudiation must
be unconditional, Fairfax, 582 F.2d at 1326 (citing Frank F. Pels
Co. v. Saxony Spinning Co.,287 F. 282, 288 (4th Cir. 1923)); 17B
C.J.S. § 536, at 200; (4) the repudiation cannot rest on a “partial
breach” but must “go to the whole consideration of the contract,”
relate to the “very essence of the contract,” and “defeat the
object of the parties in making the contract,” Fairfax, 582 F.2d at
1328 (internal quotation marks omitted); Studio Frames, 369 F.3d at
383; 9 Corbin § 973, at 805; 17B C.J.S. § 536, at 199; (5) while
the repudiation need not be express, if it rests on the defendant’s
conduct it must evince “a clear intention to refuse performance in
the future,” Studio Frames, 369 F.3d at 383 (internal quotation
marks omitted); Fairfax, 582 F.2d at 1327; 23 Williston 63:46, at
623. These factors do not set forth a balancing test. Rather, if
a plaintiff fails to establish any one of them, it cannot prevail
on its anticipatory breach claim. With these standards in mind, we
turn to the facts of the case at hand.
B.
As evidence of anticipatory breach, Collins relies on Wausau’s
February 18, 2003 letter. In that letter Wausau informed Collins:
“By not making your replacement cost claim by the previously-
established February 6, 2003, deadline, and not meeting other terms
and conditions of the policy, we will suspend all further
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adjustment activity and close our file.” This letter fails,
however, to establish that Wausau anticipatorily breached the
policy.
The policy requires that repairs be made “as soon as
reasonably possible after the loss.” Although Collins argues that
the reasonableness of Wausau’s February 6, 2003 deadline is a
question of fact best left to a jury, all of Collins’s own evidence
supports the conclusion that the deadline was reasonable.
The representative of Cely Construction, Collins’s witness,
testified that the construction would take approximately four to
four and a half months. And Collins stipulated at trial that it
could afford to rebuild before being reimbursed. Thus, even if the
insurance policy did not require Collins to rebuild within a
reasonable time of its “loss” in August 2000 -- a question we need
not reach -- Wausau’s April 2002 notification that Collins must
rebuild within the next nine months, by February 6, 2003, provided
Collins with more than sufficient time, even according to Collins’s
own witness. Because the deadline was reasonable, Wausau’s
February 18, 2003 letter was in keeping with the terms of the
contract, not a repudiation of it.
Collins’s anticipatory breach claim fails.
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III.
Collins also argues that a reasonable jury could have found
that Wausau breached an implied covenant of good faith and fair
dealing. Collins asserts that Wausau breached this covenant
because it negotiated a replacement value with Collins in advance
of the rebuild on another property (the 7150 Property), began a
similar course of negotiations here, and so knew that Collins
expected to reach a similar agreement here, and yet imposed an
arbitrary deadline that Collins could not meet.
Collins correctly points out that under South Carolina law, an
implied covenant of fair dealing requires a court to look to the
course of dealing between the parties. See Commercial Credit Corp.
v. Nelson Motors, Inc., 147 S.E.2d 481, 485 (S.C. 1966). But even
in light of the course of dealing between the parties over the 7150
Property, the undisputed evidence shows that Wausau has
“perform[ed] those things that according to reason and justice [it]
should,” Boddie-Noell Props., Inc. v. 42 Magnolia P’ship, 544
S.E.2d 279, 284 (S.C. Ct. App. 2000) (internal quotation marks
omitted), aff’d, 574 S.E.2d 726 (S.C. 2002), and so has not
breached the implied covenant.
Collins’s own evidence demonstrates that Wausau notified
Collins of the February 6, 2003 deadline on April 22, 2002 -- over
nine months in advance of the deadline, and twenty months after the
fire. According to Collins’s own witness this deadline provided it
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with more than the four or five months needed to rebuild, an
expense Collins conceded it could afford to undertake without the
insurance payment. Collins’s evidence also demonstrates that
Wausau repeatedly and consistently reminded Collins of the February
6 deadline in numerous letters prior to that deadline. A
reasonable trier of fact could draw only one conclusion from this
evidence: that Wausau did not breach the implied covenant of good
faith and fair dealing.
IV.
For all of these reasons, the judgment of the district court
is
AFFIRMED.
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