Grossmann v. Saunders
| Decision Date | 13 January 1989 |
| Docket Number | No. 860310,860310 |
| Citation | 376 S.E.2d 66,237 Va. 113 |
| Parties | , 8 UCC Rep.Serv.2d 214 Harold G. GROSSMANN v. M. Guy SAUNDERS, et al. Record |
| Court | Virginia Supreme Court |
George Mason, III; Lynn C. Brownley, Montross, (Mason, Williams and Mason, Colonial Beach, on brief), for appellant.
Robert O. Tyler, Alexandria, John D. Epps, Richmond, Jessica Sanders Jones, Alexandria (Paul G. Saunders, II, Richmond, Roberta A. Motherway, Robert F. Brooks, Alexandria, Edward B. Koehler, New York City, Tyler, Bartl, Burke & Albert, Alexandria, Browder, Russell, Morris & Butcher, Hunton & Williams, Richmond, on briefs), for appellees.
Present: CARRICO, C.J., POFF, * COMPTON, STEPHENSON, RUSSELL, THOMAS, and WHITING, JJ.
This is an appeal from the trial court's judgment sustaining a demurrer to a motion for judgment brought against multiple defendants.
Harold G. Grossmann filed a motion for judgment against M. Guy Saunders and his wife, Carolyn K. Saunders (collectively, Saunders), American Vacation Resorts, Inc. (AVR), Community Federal Savings and Loan Association (Community Federal), and Bank of Virginia (the Bank). The motion for judgment contained nine counts, alleging, inter alia, breach of contract, breach of fiduciary duty, and intentional fraud. The trial court sustained demurrers filed by all defendants, and Grossmann appeals. By his assignments of error, Grossmann claims that the trial court erred in sustaining the demurrers filed by each defendant.
The facts alleged in Grossmann's motion for judgment are as follows. From December 17, 1980, to February 1, 1983, Grossmann and Saunders were partners in Belle Mount Associates, a general partnership in Richmond County. The partnership owned real estate in the county and operated a vacation resort or country club that sold memberships to the general public. Many of the sales were financed by the partnership, with portions of the purchase prices evidenced by notes made by the purchasers.
On February 1, 1983, Grossmann and Saunders entered into a dissolution agreement (the agreement) in which Grossmann assigned and transferred all his interest in the partnership to Saunders. The agreement was attached to and made a part of the motion for judgment. This appeal focuses upon clause 2 of the agreement, which provides as follows:
2. [Saunders] agrees to pay to [Grossmann] the sum of $100,000.00 upon the delivery of the deed aforesaid to the real property hereinabove described. [Saunders] covenants that he will continue to develop a country club in Richmond County, Virginia and will pay to [Grossmann] as additional consideration for the premises set forth in paragraph 1, as follows:
On January 1 of 1984, [Saunders] will designate ten (10) promissory notes for purchase of a country club membership payable to him, his successors or assigns, each having a principal value of not less than $5,000.00, provide to [Grossmann] a copy of the contract file for each of the notes, and set aside and pay to [Grossmann] on a monthly basis during the term of the notes the combined principal and interest collected therefrom for each of the said notes. During successive months and on the first day thereof, from February 1984 to September 1984, [Saunders] will designate and set aside, as set forth above, promissory notes according to the following schedule:
February 1984 -12 notes
March 1984 -14 notes
April 1984 -10 notes
May 1984 -12 notes
June 1984 -12 notes
July 1984 -12 notes
August 1984 -12 notes
September 1984 -12 notes
The aggregate principal value of the combined notes shall be in such an amount that their yield, including interest, over the term of the notes equals $1,000,000.00, to which end the number of contracts designated and set aside in September 1984 may be decreased or increased. During the first two years from the designation and setting aside of the notes as aforesaid, [Saunders] covenants that upon default in the payment of any of the notes by the maker thereof, he will cause a replacement note or notes of equal value to be set aside for the benefit of [Grossmann]; in the event of a default in the payment of any of the notes by the maker thereof after two years from the original note having been designated and set aside, [Saunders] covenants to assign the said note in default to [Grossmann] so that he may pursue any remedy available to him at law.
In the event that [Saunders] sells or transfers any interest in and to the assets which [Grossmann], by the terms hereof, shall convey to [Saunders], prior to the performance by [Saunders] of his obligations hereunder, [Saunders] covenants that from the proceeds of the sale or transfer of the assets, he will pay to [Grossmann] the unpaid balance of his indebtedness to [Grossmann], after allowance for the entire sum of the principal and interest paid, due, or to become due on the contracts which have been set aside for [Grossmann's] benefit, reserving, however, [Grossmann's] recourse against [Saunders] on all such contracts as may thereafter go into default within two years after they have been originally set aside.
In clause 4 of the agreement, Saunders further agreed to be solely responsible for all liabilities of the partnership and to "indemnify and hold [Grossmann] blameless ... from all such liabilities." Among the partnership debts were notes in the aggregate amount of $1,200,000 that Saunders agreed "to pay forthwith."
Grossmann properly performed all his obligations and duties under the agreement by surrendering his interest in the partnership to Saunders. Saunders, in turn, paid to Grossmann the initial cash payment of $100,000. On brief, Grossmann concedes that Saunders paid the "various joint obligations ... as required by Clause 4."
Saunders, "in accordance with [the agreement], [did] designate, set aside and segregate certain notes as ... Grossmann's ..., the yield of which totalled $1,000,000.00." The "designated notes were separately maintained, ... catalogued on a computer list and on a written ledger ... and were in all respects and particulars identified as ... Grossmann's notes." Saunders and AVR furnished Grossmann with copies of the notes.
Saunders incorporated AVR and transferred to it the assets of the former partnership. AVR "is solely owned and controlled by [Saunders]," and "the notes ... are payable to it" as the "successor" to Saunders. Saunders and AVR forwarded payments received on the notes together with an accounting to Grossmann each month through September 1984. "[I]n collecting, accounting and paying over the proceeds of the ... notes," Saunders and AVR acted for Grossmann "in a fiduciary capacity."
Saunders and AVR paid to Grossmann "a total of $53,322.53 ... as proceeds of ... [the] notes through September 1984," but made no further payments thereafter "in breach of [the agreement] and the ... fiduciary duty." Although Grossmann has demanded payment of the sums in default under the agreement and delivery of the notes, Saunders and AVR have refused the demands and Grossmann "has been damaged thereby."
On November 30, 1984, Grossmann brought a chancery suit Prior to the time the notes were given to the Bank and Community Federal, they had actual notice of "Grossmann's interest in and claim to [the] notes." Thus, Grossmann asserts, his claim to and interest in the notes "is superior to that of all of the defendants."
Grossmann alleges in the motion for judgment that all defendants have breached the agreement. * He specifically alleges that Saunders and AVR breached the agreement by (1) ceasing to make payments to him, (2) transferring the notes to the Bank and Community Federal, (3) failing to "set aside and pay the proceeds of [the] notes to [Grossmann]," and (4) ceasing "to develop a country club or resort." In sustaining each defendant's demurrer, the trial court ruled that Grossmann's motion for judgment "failed to state a cause of action" against any of the defendants.
The office of a demurrer is to test whether a motion for judgment states a cause of action upon which relief can be granted. A demurrer admits the truth of all material facts well pleaded, including facts expressly alleged and all reasonable inferences arising therefrom. Bowman v. State Bank of Keysville, 229 Va. 534, 536, 331 S.E.2d 797, 798 (1985); Penick v. Dekker, 228 Va. 161, 166, 319 S.E.2d 760, 763 (1984).
Grossmann contends that he alleged a cause of action for breach of contract against Saunders and AVR in two particulars: (1) Saunders and AVR breached the agreement when they ceased making payments to Grossmann from money they received on notes set aside and designated for Grossmann and when they transferred the notes to the Bank and to Community Federal, and (2) Saunders and AVR breached the agreement when they ceased to develop a country club.
AVR contends at the outset that because it was not a party to the agreement it is not liable for its breach. We do not agree.
Although AVR was not a party to the agreement, it was incorporated by and "solely owned and controlled" by Saunders. As Saunders' "successor," AVR received the assets that Saunders had acquired from Grossmann and conducted the business formerly conducted by Saunders. Moreover, AVR sent copies of the notes, payments received on the notes, and accountings to Grossmann. Based upon these facts and all reasonable inferences deducible therefrom, a fact finder reasonably could conclude that AVR acquired Saunders' rights and assumed Saunders' obligations under the agreement. See Heating Corp. v. Dillon Sup. Co., 156 Va. 597, 606, 159 S.E. 78, 81 (1931) (...
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