BARNACLE BROADCAST. v. BAKER BROADCAST.

• Decision Date: 09 October 2000
• Docket Number: No. 3252.,3252.
• Citation: 538 S.E.2d 672,343 S.C. 140
• Parties: BARNACLE BROADCASTING, INC., Respondent, v. BAKER BROADCASTING, INC., Appellant.
• Court: South Carolina Court of Appeals

343 S.C. 140

538 S.E.2d 672

BARNACLE BROADCASTING, INC., Respondent, v. BAKER BROADCASTING, INC., Appellant.

No. 3252.

Court of Appeals of South Carolina.

Heard September 13, 2000.

Decided October 9, 2000.

Rehearing Denied January 8, 2001.

John P. Linton, Julie O. Medich, and Martin C. McWilliams, Jr., all of Sinkler & Boyd, of Charleston; and W. Brantley Harvey, III, and Thomas A. Holloway, both of Harvey & Battey, of Beaufort, for appellant.

James C. Gray, Jr., and Elizabeth Scott Moise, both of Nelson, Mullins, Riley & Scarborough, of Columbia; and V.M. Manning Smith, of Moss & Kuhn, of Beaufort, for respondent.

HUFF, Judge:

In this declaratory judgment action, Baker Broadcasting, Inc. appeals the trial court's determination that Baker's Asset Purchase Agreement with Barnacle Broadcasting, Inc. was an option contract and the option had terminated entitling Barnacle to the return of the assets. We reverse and remand.

FACTUAL/PROCEDURAL BACKGROUND

On April 27, 1995, Baker entered into an Asset Purchase Agreement (referred to by the parties as the APA) with Barnacle to purchase the assets of a radio station owned by Barnacle. On the same day, the parties entered into a Local Programming and Marketing Agreement (referred to as the LMA) that authorized Baker to operate the radio station. The purchase price under the APA was $1,225,000. Upon the execution of the APA, Baker paid Barnacle $100,000 as an earnest money deposit. Baker was to pay the remainder of the purchase price at closing.

The sale and purchase of the station was subject to approval by the Federal Communications Commission (FCC). The APA contained a covenant that Baker and Barnacle would "file with the FCC on or before January 1, 1996, an application and such other documents ... as may be necessary or advisable to obtain FCC approval of the Assignment of License from [Barnacle] to [Baker]." The closing for the APA was to take place within thirty days of the FCC consent "or such other time as the parties may mutually agree...." The APA listed several events for termination of the agreement including termination upon "[w]ritten notice of Buyer to Seller at the earlier of the following: (a) the end of twelve (12) months following the effective date of the LMA; or (b) April 30, 1996, that Buyer, in its sole discretion, has elected to terminate this Agreement." If Baker terminated pursuant to this provision, Barnacle was to retain the $100,000 earnest money deposit.

The term of the LMA commenced on May 1, 1995. Unless otherwise terminated, the LMA was to end on the earlier of April 30, 1998 or the closing of the sale of the station pursuant to the APA. In the event the LMA was terminated prior to the closing under the APA, the termination would result in the termination of Baker's obligations and liabilities under the APA.

Due to technical difficulties, Baker did not begin broadcasting until late June and was unable to run commercials until early July. The parties did not file the FCC application by January of 1996 as provided in the contract.

By letter dated February 19, 1997, Barnacle stated the APA had terminated because the FCC assignment application had not been filed on or before January 1, 1996. Barnacle inquired whether Baker was still interested in buying the station under a new agreement. Baker responded that the APA was in full force. It attached a formal opinion letter drafted by its FCC attorney. It informed Barnacle that it was instructing its attorney to file the paperwork for the FCC assignment in the third week of April. Baker asserted they would close the transaction, subject to FCC approval, between August 15 and September 30, 1997, as the parties had previously discussed.

In response, Barnacle asserted that the APA was not enforceable by either party. Barnacle stated, "I believe my legal position is quite clear and sound. What is less clear is how much may I, in good conscience, take advantage of it." On March 7, 1997, Baker sent Barnacle the assignor's part of the FCC application. It asked Barnacle to review the document and send it to Baker's FCC attorney who already had its part of the form. Baker informed Barnacle that it planned to immediately file the FCC documents. On March 27, 1997, Barnacle gave Baker a list of options to consider. The options included (1) Baker taking the $100,000 back and tearing up the APA, (2) Baker purchasing the station without the tower for $1.5 million and leasing the antenna and transmitter sites, (3) purchasing the station with the land and tower, but without the proceeds of any tower leases in place before transfer of the license, (4) purchasing the station, land and tower, including the leases, for $2,000,000 in addition to a percentage of the cash flow of the leases, or (5) suing Barnacle for specific performance. On April 4, 1997, Baker's attorney sent Barnacle a letter indicating they had not received the assignor's portion of the FCC application from Barnacle, and enclosed another copy of the assignor's part. The attorney asserted Baker was standing ready, willing and able to file the application with the FCC and to close on the sale after receiving the appropriate FCC authorization.

On April 22, 1997, Barnacle filed the present action seeking a declaratory judgment that the APA was no longer enforceable. Baker asserted counterclaims for specific performance and breach of contract, and sought punitive damages.¹

The trial court held the APA was an option contract, which must be strictly construed against Baker and requires exact compliance with its terms. It found the FCC filing was the invoking event that would alert Barnacle that the option was being exercised and that the option, when exercised, would result in a bilateral contract. It found the option should have been exercised by Baker on January 1, 1996 because time is of the essence in an option contract. However, the court held Barnacle waived strict compliance by letting January 1, 1996 pass without taking any action when the option was not being exercised. The court further held time again became a condition of the contract and the extended delay justified the termination of the contract. Accordingly, it declared the option was terminated.

LAW/ANALYSIS

Standard of Review

The characterization of a declaratory judgment suit depends on the nature of the underlying controversy. Felts v. Richland County, 299 S.C. 214, 383 S.E.2d 261 (Ct.App.1989), aff'd 303 S.C. 354, 400 S.E.2d 781 (1991). In order to determine the standard of review to apply, we must look to the kind of action in which the issue involved would have been decided if there were no declaratory judgment procedure. Id. Both Baker and Barnacle assert this action involves interpretation of a contract and, as such, is an action at law. See Jacobs v. Service Merchandise Co., 297 S.C. 123, 375 S.E.2d 1 (Ct.App. 1988) (noting that an action to construe an unambiguous written contract is one at law). In an action at law, tried without a jury, our scope of review extends merely to the correction of errors of law. Crary v. Djebelli, 329 S.C. 385, 496 S.E.2d 21 (1998). Thus, the trial court's factual findings will not be disturbed on appeal unless a review of the record discloses that there is no evidence which reasonably supports the judge's findings. Id.; Townes Assocs., Ltd. v. City of Greenville, 266 S.C. 81, 221 S.E.2d 773 (1976).²

DISCUSSION

Baker asserts the trial court erred in holding the APA was an option contract.

"The cardinal rule of contract interpretation is to ascertain and give effect to the intention of the parties." Chan v. Thompson, 302 S.C. 285, 289, 395 S.E.2d 731, 734 (Ct.App.1990). In determining the intention of the parties, a court first looks to the language of the contract and if the language is clear and unambiguous, the language alone determines the contract's force and effect. C.A.N. Enterprises, Inc. v. South Carolina Health & Human Servs. Fin. Comm'n, 296 S.C. 373, 377, 373 S.E.2d 584, 586 (1988); Conner v. Alvarez, 285 S.C. 97, 101, 328 S.E.2d...