594 F.3d 285 (4th Cir. 2010), 08-2272, Homeland Training Center, LLC v. Summit Point Auto. Research Center
|Docket Nº:||08-2272, 08-2273.|
|Citation:||594 F.3d 285|
|Opinion Judge:||WILKINSON, Circuit Judge:|
|Party Name:||HOMELAND TRAINING CENTER, LLC, a Tennessee Limited Liability Company, Plaintiff-Appellant, v. SUMMIT POINT AUTOMOTIVE RESEARCH CENTER, a West Virginia Limited Liability Company, individually and in its capacity as Trustee of the William Scott Inter Vivos Trust, Defendant-Appellee, and William Scott Inter Vivos Trust, Defendant. Homeland Training Ce|
|Attorney:||John Harlan Mahaney, II, Huddleston & Bolen, LLP, Huntington, West Virginia, for Homeland Training Center, LLC. William Richard McCune, Jr., Martinsburg, West Virginia, for Summit Point Automotive Research Center. J. Jarrod Jordan, Huddleston & Bolen, LLP, Huntington, West Virginia, for Homeland ...|
|Judge Panel:||Before WILKINSON, DUNCAN, and DAVIS, Circuit Judges. Judge WILKINSON wrote the opinion, in which Judge DUNCAN joined. Judge DAVIS wrote a separate opinion dissenting in part and concurring in part. DAVIS, Circuit Judge, dissenting in part and concurring in part:|
|Case Date:||February 03, 2010|
|Court:||United States Courts of Appeals, Court of Appeals for the Fourth Circuit|
Argued Oct. 27, 2009.
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[Copyrighted Material Omitted]
Affirmed in part, reversed in part, and remanded by published opinion.
After one party to a contract repudiated it, the other party filed an action for breach of contract and requested an order of specific performance. As the litigation progressed, it became apparent that the repudiation had destroyed any prospect of salvaging the contract, prompting the non-repudiating party to abandon its earlier request for specific performance and to seek monetary damages instead. The district court, however, held that as a matter of West Virginia law, the original decision to seek specific performance precluded the nonrepudiating party from being able to claim monetary damages. This was error. The theory of waiver on which the district court predicated its ruling is not supported by West Virginia contract law or the law of contracts generally. The district court's ruling lets a party who repudiates a contract force a non-repudiating party into a premature election of remedies. Allowing the repudiating party to gain the upper hand in this manner would undermine the value of contractual commitments. We therefore remand this case for trial on the issue of damages occasioned by the repudiation.
Defendants Summit Point Automotive Research Center, LLC, and the William Scott Inter Vivos Trust, (collectively, " SPARC" ) own a training facility in Jefferson County, West Virginia, that is used by government security personnel. On July 25, 2006, as part of a plan to have certain complementary services provided on-site, SPARC agreed to lease 12 acres of undeveloped land at the facility to another company.
Although the lease agreement took effect upon signing, it provided that the initial term would not begin unless SPARC'S tenant chose to initiate it. The lease also provided, however, that SPARC could force a decision one way or the other by obtaining the necessary permits for the site and recording a " final plat," a term described at some length by local ordinance. See Jefferson County, W. Va., Subdivision Ordinance, art. 3, § la; art. 8, § 1c. This worked in two ways. First, the lease would automatically terminate once a plat was recorded unless the tenant notified SPARC within sixty days that it desired to proceed. Second, if the lease were kept alive, the initial term would automatically begin 120 days after recordation unless the tenant indicated that it had not obtained satisfactory financing.
The lease allowed the tenant to assign its interest if SPARC consented to the assignment in advance. SPARC could not unreasonably withhold its consent, but the tenant would remain liable under the lease unless the beneficiary of the assignment had a net worth greater than $10 million. The lease also provided that each party could request that the other affirm or deny the contract's continued validity on ten days' notice. Finally, it allowed for an award of attorneys' fees to a " prevailing party" in litigation.
On October 3, 2006, Homeland Security Corporation, SPARC'S original tenant, executed an assignment of its rights under the lease to Homeland Training Center, LLC, (" HTC" ), the plaintiff in this suit. SPARC was not asked for its written consent prior to the assignment, but it was informed of the assignment in December 2006. Nine months after being notified, SPARC sent a letter requesting verification that HTC had a net worth of at least $10 million, but also stating that if SPARC had known of the assignment ahead of time, " [w]e would, of course, have consented to this transaction."
HTC entered into negotiations in early 2007 with an investment company it hoped would finance the project. SPARC, however, formed the opinion that HTC was not doing enough to position itself to proceed with the lease, and in June 2007 it communicated its concerns to HTC in writing. HTC responded by letter several days later, describing its efforts up to that point. The parties met to discuss the issue on July 23, 2007, and in the course of the meeting, SPARC told HTC that it would probably be filing a " merger plat" soon. This was thought to be faster than the subdivision process associated with preparation of a " final plat." On August 7, 2007, SPARC filed a merger plat in the Jefferson County Clerk's Office, but it did not notify HTC that it had done so. Shortly thereafter, SPARC also asked to amend the lease to provide that the initial term of the lease would begin no later than December 1, 2007, but HTC denied the request.
SPARC first notified HTC that it had actually filed the merger plat in a letter dated October 17, 2007. That letter stated that the lease had terminated because HTC had failed to provide notice of its determination to proceed within sixty days of the plat recording. HTC responded on October 26, 2007, stating that the merger plat was not a " final plat" within the meaning of the lease, that the lease remained " in full force and effect," and that it intended " to perform under the Lease as such." SPARC replied on October 31, stating that " [t]he Lease has been terminated by [HTC's] inability or refusal to adhere to its terms." That same day, HTC received a commitment letter from the investment company with which it had been negotiating since the start of the
year. The letter expired before it could be acted upon, however.
On December 4, 2007, HTC wrote SPARC to say that it had received commitments for financing, but that because of SPARC'S having " taken the position that the Lease is terminated, HTC will likely be unable to close on the funding and to consummate the transactions with its funding sources." HTC asked SPARC whether it would " acknowledge that the Lease between the parties is still in effect and avoid this impending problem." The next day, HTC filed a breach of contract suit in federal district court for the Northern District of West Virginia. The suit sought a preliminary injunction, which was granted shortly thereafter, and requested an order of specific performance. Later that same day, SPARC responded to HTC's December 4 letter by fax, stating that it would neither admit nor deny the continued existence of the lease, but offering to " accept the lease as it stands" if HTC provided proof of financing by January 15, 2008. Three weeks later, SPARC filed counterclaims for breach of contract against HTC, alleging that HTC had breached the lease by failing to make sufficient efforts to obtain financing and by participating in the assignment from Homeland Security Corporation.
In January 2008, HTC disclosed the litigation to the various investors who had pledged to finance the project, prompting them all to withdraw. Throughout the spring, HTC worked to make alternative financing arrangements. SPARC, meanwhile, prepared a new plat of the property, one which indisputably qualified as a " final plat," and duly recorded it after approvals had been obtained. With two weeks to go before HTC would be forced to notify SPARC that it wished to keep the deal alive, the venture capital firm that HTC saw as its last chance to secure financing informed HTC that while it was interested in financing the project, it would not become involved unless the lease dispute was resolved. One week later, HTC notified SPARC that it was exercising its option to terminate the lease. Thereafter, HTC dropped its claim for specific performance and instead asked the district court for an award of damages.
Both sides filed motions for summary judgment. The district court rejected each of SPARC'S counterclaims, holding that HTC was under no duty to seek out financing within any particular time frame and that, while the assignment was improper, SPARC had waived any claim by assenting to it after the fact. The district court also held that although SPARC had repudiated the contract, HTC could not bring a damages action based upon the repudiation because its earlier decision to request specific performance constituted a binding election not to terminate the contract. In short, the court held that though both sides had breached the contract, neither side could recover for breach. Both sides appealed from the district court's rulings.
We review the grant or denial of motions for...
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