In re LCS Homes, Inc.
| Decision Date | 25 July 1989 |
| Docket Number | Adv. No. 87-0055-A.,Bankruptcy No. 87-02029-A |
| Citation | 103 BR 736 |
| Parties | In re LCS HOMES, INC., Debtor. LCS HOMES, INC., Plaintiff, v. DRIGGS BUILDING SYSTEMS, INC. and John Driggs, Defendants, Robert Fletcher, Intervenor. |
| Court | U.S. District Court — Virgin Islands, Bankruptcy Division |
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Joseph F. Manson, III, McGary, MacDowell & Manson, P.C., Fairfax, Va., for debtor.
Wiley R. Wright, Jr., H. Bradley Evans, Jr., Hazel, Thomas, Fiske, Beckhorn & Hanes, P.C., Alexandria, Va., for defendant, Driggs Bldg. Systems, Inc.
Robert B. Easterling, Easterling & Goodall, Stafford, Va., for intervenor, Robert Fletcher.
Roy B. Zimmerman, Alexandria, Va., for defendant, John Driggs.
MARTIN V.B. BOSTETTER, Jr., Chief Judge.
LCS Homes, Inc. (hereinafter "LCS"), a debtor in this Court, filed a complaint against Driggs Building Systems, Inc. (hereinafter "DBSI") seeking a declaratory judgment that DBSI breached its contract by failing to perform a condition precedent. DBSI answered and filed a counterclaim alleging that LCS Homes prevented DBSI from performing the condition precedent by committing an anticipatory breach of the contract and seeking monetary damages. Prior to the date set for trial, this Court granted leave to add John Driggs (hereinafter "Driggs"), individually, and Robert Fletcher (hereinafter "Fletcher"), a former employee of LCS Homes, as defendants. Fletcher in turn filed a counterclaim against LCS Homes alleging that LCS prevented a sale of property from closing and thus prevented Fletcher from receiving his real estate commission. LCS Homes amended its complaint, to add nine additional counts seeking declaratory judgment and one count seeking monetary damages for breach of an occupancy agreement. Generally, the amended complaint seeks a declaratory judgment that the defendants failed to perform the conditions precedent by refusing to obtain approval for its assumption of a promissory note and refusing to settle on the date provided for in the contract, that the defendants were not excused from their failure to settle, that time was of the essence, that the defendants were not excused from their failure to settle on the settlement date as provided in the modified contract, that their failure to settle within a reasonable time was a failure to fulfill a condition precedent, that the modifications to the contract are void under the Statute of Frauds, and that the defendants waived their legal and equitable remedies.
At the trial, the Court granted DBSI the right to file an amended proof of claim, and the parties agreed that the trial would be dispositive of all claims set forth therein. At the conclusion of the plaintiff's evidence, the defendant moved for directed verdict and the Court took the motion under advisement. At the conclusion of the trial, the plaintiff requested that this Court consider its earlier motion for summary judgment as a motion for a directed verdict. The Court took the entire matter under advisement including each party's motion for a directed verdict as well as the plaintiff's motions to strike portions of the defendant's answer and for sanctions.
In December 1985, LCS Homes, through Bruno Figliuzzi, (hereinafter "Figliuzzi"), its president and chairman of the board, agreed to sell to John Driggs, or his assigns, two parcels of land, one containing a modular home manufacturing plant ("the plant") and the other containing 228 acres of undeveloped land. The entire agreement included three documents consisting of two typed contracts and one wire mailgram ("the December 1985 contract"). The wire mailgram identified February 28, 1986 as the date for closing "unless otherwise agreed to by both parties." As consideration for the purchase, the purchaser agreed to assume the industrial revenue note already on the property. However, the assumption was subject to a condition precedent, specifically the approval of Citibank, N.A., the noteholder. The condition precedent reads as follows:
CONTINGENCIES: This Agreement is expressly made contingent upon the assumption of the aforesaid balance due on the $6,000,000.00 Industrial Development Revenue Note (LCS Homes, Inc. Facility) 1983 Series A owned by Citibank N.A., the written consent of Citibank N.A. to said purchase and assumption, the approval by the Industrial Development Authority of Stafford County, Virginia, of said conveyance and assumption of its $6,000,000.00 Industrial Revenue Note (LCS Homes, Inc. Facility) 1983 Series A and the preparation and approval by the parties hereto, Citibank, N.A., and the documents effecting the conveyance and the assumption of the Industrial Revenue Bond.1
In January of 1986, Driggs, as purchaser, contacted Citibank seeking its approval of the assumption. Subsequently, Figliuzzi, as seller, contacted Citibank to discuss its approval of the assumption. By late January, Citibank still had not approved the assumption. On February 10, 1986, Citibank met with Figliuzzi and Driggs "to hammer out a deal." Those in attendance at the meeting were three Citibank representatives, Figliuzzi, John Driggs and two other representatives of The Driggs Corporation.2 At this meeting, Driggs and his corporation, offered to put up certain collateral in order to secure Citibank's approval of its assumption of the industrial revenue bond. However, the collateral that Driggs offered was not acceptable to Citibank. Figliuzzi testified that It appears from the testimony and other evidence that he intended this to be a "shortfall" guarantee. Figliuzzi then testified that the parties set a date for settlement in "mid-March after the hearing3 . . . as soon after the hearing as we can." On February 12, 1986, Ronald DePaolo of Citibank recorded in a memorandum the agreement that had been reached at the February 10, 1986 meeting. The DePaolo memorandum did not mention any closing date.
The original closing date of February 28, 1986, as set forth in the December 1985 contract, passed with no attempt to close by the parties. On March 13, 1986, John Driggs assigned all of his right, title and interest under the December 1985 contract to DBSI. On March 17, 1986, two Citibank representatives, Alan Peters and Ronald DePaolo, wrote a letter to Figliuzzi and Driggs reciting the "agreement in principle" that had been reached at the February 10 meeting with still no mention of a closing date. The letter repeated the same terms as the February 12 memorandum and added an additional term, that Figliuzzi provide collateral for his shortfall guarantee. Initially, Figliuzzi rejected this request but, eventually on March 25, 1986, agreed to provide collateral for the guarantee. Figliuzzi wrote a letter on April 10, 1986 to Ronald DePaolo in which he refers to the March 17 letter and explains that at the February 10 meeting, he did not agree to collateralize his guarantee, but that he now agrees to provide collateral. In his letter, Figliuzzi makes no mention of a closing date. Citibank subsequently asked Figliuzzi for additional collateral but, in spite of the demands, Figliuzzi never agreed to provide additional collateral.
On April 9, 1986, Lewis Morse, counsel for DBSI, wrote a letter to Barbara Vrancik, counsel for Citibank, in which he stated, "we remain hopeful that all documentation can be executed and delivered by April 18, the target date which was established sometime ago." And finally, on April 18, 1986, Lewis Morse, counsel for DBSI, wrote to Paul Scott, the settlement attorney, and Barbara Vrancik, counsel for Citibank, declaring, "as I have previously indicated, it is essential to us that this transaction be concluded prior to May 1, 1986, with everyone's cooperation, this can be accomplished." None of these letters were delivered to Figliuzzi. In his testimony, Figliuzzi stated, "every time I asked, they gave me different dates of closing."
Ultimately, the parties did not close the contract. DBSI, the purchaser and assignee, was ready and willing to go forward with the deal. Notably, Figliuzzi, as representative of the seller, testified, "DBSI was trying to help close the deal: there was no question about it, that DBSI was in contact with Citibank." On April 15, 1986, Citibank, through its attorney sent a proposed guarantee to DBSI and the settlement attorney. On April 17, the settlement attorney and attorneys for Citibank and DBSI discussed by way of a conference call the assumption agreement, deed of assumption, consent agreement, collateral deed of trust and the guarantee. However, also on April 17, 1986, Figliuzzi met with Reginald Burner of DBSI and told Burner that he wanted out of the deal. Burner replied that Figliuzzi should not expressly cancel, but instead expressly give notice to Citibank and Driggs that he is not willing to give any additional collateral for the guarantee and that if the matter is not closed by April 30, 1986, he will then consider Citibank in breach. Instead, on April 21, 1986, Figliuzzi wrote a letter stating that he was cancelling the agreement. Figliuzzi then offered, through a phone call on April 25, a letter on April 28, and a meeting on April 29, 1986, a new agreement for the sale and assumption. DBSI, as purchaser, did not...
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